New to the world of finances? Don’t worry — it’s not as scary as you may think. Whether you’re trying to learn better payday habits or just aiming to maximize your 401(k), we’ve rounded up some of our best savings and investment tips for young adults to get you started.
Start with a budget
Before you dive into the world of stocks and savings accounts, start with building your budget. Once you’re able to track your income and expenses, you can identify areas where you can cut back to save more money. There are tons of apps that can streamline the process (Rocket Money is a great option!), but if you’re aiming to do it old-school, start by listing all of your income sources and then all of your expenses (bills, groceries, etc.) Once you have a clear picture of what you’re working with, you can make adjustments and allocate some of that income elsewhere.
Pay off your high-interest debt ASAP
Chances are, if you’re a twenty-something, you have a little bit of credit card debt. Pro tip: pay it off as soon as you can. High-interest debt can eat up a lot of your income, which will make it harder for you to build your savings. If you have a considerable amount of high-interest debt, consider consolidating it into a lower-interest loan or transferring it to a low-interest credit card.
Build an emergency savings fund
An unexpected medical emergency, car problems, sick pets — these types of emergencies put stress on your finances, too. Aim to put aside at least $1,000 into a savings account that you can tap into for emergencies only. Trust us, the peace of mind is worth it alone.
Once you’ve paid off your high-interest debt and started to build your savings, it’s time to start investing! Don’t worry — it’s not as complicated as you may think. Follow these quick tips to make the most of your investment journey:
- Start small. You don’t want to put all of your hard-earned money into one investment and lose everything. Start with a small amount of money that you can afford to lose. This allows you to get a feel for how it works without high risk.
- Diversify your portfolio. Just like you shouldn’t put all of your money into one investment, you also shouldn’t put everything you have into one type. Instead, spread your money across different types of investments, like stocks, bonds and mutual funds.
- Keep it simple. Invest in low-cost index funds or exchange-traded funds (ETFs). These types of investments are easy to understand and can help you build your wealth over time.
Take advantage of employer-sponsored retirement plans
If your employer offers a retirement plan — like a 401(k) or IRA — take advantage of it! Many employers offer to match contributions up to a certain percentage, so you can build your retirement savings even faster. And if you change jobs, be sure to transfer your 401(k) so you don’t lose out on your contributions. If your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account (IRA) or a Roth IRA.
Don’t stop learning
Read books and articles, listen to podcasts, and follow financial-minded social media accounts. The more you know about your finances, the more empowered you’ll be to make the best decisions for yourself and build long-term wealth!
Now that you’re inspired to save and invest, check out our favorite sneaky ways to save money this week!