Financial advisors will tell you that you are never too young to begin investing. There is quite a bit of truth to that, given that time is the investor’s best friend for making a profit. So in that spirit, you can bet that financial advisors will be working overtime the next several months to establish relationships with new college grads looking to finally embark on their careers.
As a recent graduate yourself, investing for your retirement should be part of your long-range plans. You may see your retirement as still being 40 to 50 years off, but that time will start flying by once you find yourself fully engaged in the adult world. Do not wait until you are 50 to start thinking about retirement. Start thinking about it now.
Advisors at Western International Securities, a California dealer broker, explains there are things recent college grads can do to prepare to begin investing within the next couple of years. Doing these things will put them in a good position to start investing as soon as they have established themselves.
Learn How to Budget
Western International Securities advisors frequently work with older clients who waited too long to begin investing. Often, those clients failed to invest simply because they were not equipped with basic financial tools that would allow them to do so. The important tool they were missing was the ability to budget.
Budgeting is critical for wise financial management at every stage of life. It is critical to paying the bills, putting savings aside, and building a portfolio for retirement. As a college grad, learning how to budget will have a profound effect on your financial future.
Accept a Simpler Life
Up until the late 1980s, it was generally accepted that adults would not begin looking for a house until their 30s. They would drive used cars and do other things to maintain a fairly simple lifestyle so that they could save for retirement. What it took their parents until their 40s and 50s to acquire, today’s young people want by the time they are in their late 20s. But it is a ‘pay me now or pay me later’ scenario. If you are willing to accept a simpler lifestyle while you’re young, you will have extra money put away so you can enjoy a better retirement.
Avoid Unnecessary Debt
Some measure of indebtedness is necessary due to the high cost of durable goods. You could even make the case that some debt is good debt. However, your financial future will be a lot more secure if you avoid unnecessary debt while you are young. Do not max out your credit cards; don’t buy expensive toys and gadgets you neither need nor can afford; save traveling the world for retirement.
The thing to understand about debt is that it costs extra money to service. Just as an example, a $20,000 car loan for five years at 3% interest will cost you more than $1,500 in interest. The same principle applies to credit card debt, mortgages, and even your student loans. You pay to borrow. So, common sense dictates that you borrow as little as necessary. The money you save from not borrowing can be put into your investments for retirement.
The point of these three strategies is to avoid the mistakes that have prevented so many older people from investing in retirement. If you set out on the right foot and with a firm financial foundation, you will have an opportunity to start saving now, while you’re young. Then you won’t have to worry about income when you eventually do stop working.