Retirement may be a long way down the road. Not to mention, you have other financial priorities like repaying student loans, buying a car or saving for marriage or kids. But while retirement may not be at the top of your list, it is never too early to start taking steps to get on the right road to retirement.
Here are seven tips to help you plan, save, and take control of your financial future:
- Capitalize on compound interest
Time is truly on your side now, so take advantage of it and let compound interest work for you. Every dollar you put into an interest earning savings account will earn a certain percentage of interest every year. This is free money. The earlier you start saving, the more years of interest you have compounding. Who doesn’t love effortless free money?
- Use free budgeting tools
Millennials are familiar with technology, so use these skills to your advantage. Many free online budgeting tools like Mint can help you track where your money goes and be smarter about your expenses.
- Get stock market smart
Many millennials are afraid of the stock market because they view it as a high-risk venture. They don’t trust the system, and the stock market seems like gambling with their already small incomes.
Cash may be king in the short-term, but the stock market has good potential for capital growth that cash and low-yield securities can’t offer. Educate yourself on how the market works through online articles, talking with people you trust or reading books like, Investing in your 20s&30s for Dummies.
- Save automatically
One of the best habits to start now is automatic savings. Starting this habit early allows you to better understand how far your paycheck goes and simplifies savings. When you get your paycheck, don’t look at that amount as the amount you have to spend. Instead, first take out all necessary expenses including bills, debt payments, and future savings like retirement. If you start to look at your paychecks like this early on, it will keep you from neglecting your savings and regretting it in the future.
- Don’t keep up, save up
Millennials often get a bad rap of trying to keep up with the latest reality TV star. When it comes to money management, living below your means or spending way less than you earn is the real smart money move.
This is especially important when it comes to credit cards. It is easy to swipe a card and worry about it later, but this adds up quicker than you can imagine. Try to keep the mindset “if I can’t turn around and pay off this payment, I don’t need to buy it.”
- Educate yourself about retirement plans, and take the free money.
Many young adults enter the working world with limited knowledge of different retirement plans from 401(k) to IRAs.
Now is a good time to learn the difference and how the benefits of each. To get started, check out the balance’s article “401k Retirement Plan for Beginners.”
- As your income grows, so should your savings percentage.
Whether it is a raise or promotion, your income will hopefully grow over the years. When this happens, increase your savings contribution. Although you should enjoy life and treat yourself for your accomplishments, be sure to also raise the amount you save proportionally to the amount you earn. This will pay off in the long run, and you will thank yourself when the golden years come faster than you expected.