Retirement is the last thing anyone wants to think about in your twenties. You are young, you are free from responsibility and the world really is your oyster. You are discovering life for the first time, have time to study, travel and are deciding on the type of lifestyle that you want to lead and how you want to impact the world. We want everything, and we want it now. With so much to enjoy and discover, no one could not be blamed for not considering how they consider providing for themselves at the end of their working lives. Unfortunately, the financial decisions we are make at this stage of our lives have a long and lasting impact; a few small adjustments now can go a long way in safeguarding your fiscal future and eventual retirement.
Debt, Get Rid Of It
It is near unavoidable for most of us to not take on a little bit of debt at some stage in our lives; during our time in college or at the beginning of our careers, our spending often unfavourably outweighs our income. While it is great to take the opportunity and freedom to travel frequently (and you should!), it is important to ensure that your spending does not place a significant burden upon your finances. Learn to recognise the distinction between ‘good’ and ‘bad’ debt. Good debt is that which allows you to accrue wealth through the maintenance of particular assets. Investing in wisely chosen property is an example of good debt as even though you are indebted through a mortgage, you are paying off an entity which is accruing value within its own right. Debt accrued through the use of credit cards and consumer spending is recognised as ‘bad’ debt as you are paying off items which are not accruing in value but conversely are rapidly accruing interest. Mismanaging bad debt will lead to the all dreaded bad credit rating. A bad credit credit rating will seriously harm your chances of investing in assets later down the track.
If you have accrued credit card debt, set yourself a goal to wipe the slate clean before you reach your thirties. Clearing debt now will give you much greater flexibility in managing your finances later in your life and greatly improve your chances of capitalising upon your potential wealth. Give yourself the opportunity to invest in assets later down the track by clearing that bad debt as soon as possible.
Good Habits: Saving and Frugal Spending
Well it might be an overly obvious example, the effect of the Global Financial Crisis has demonstrated in no uncertain terms the drastic implications of excessive spending and debt. Those of us who are still in college are no doubt pining for the day when we are finally on a full time wage and no longer having to live on a shoestring. While eating instant noodles for the fourth evening in a row is justifiably unpleasant, this spartan lifestyle has a silver lining. See this time in your life as good practice, as an exercise in frugal spending and living. No, this does not mean committing yourself to a life of cheap noodles but rather sacrificing some of the more trivial consumerist choices we tend to make in favour of settin g aside that money for later good investments. It could be stocks or property, but it also be something more experiential and personalised to you like travel.
Identify what is important to you and your lifestyle both now and in the future and begin intelligently allocating your funds toward these objectives. Making these changes now in your consumer habits will go a long way in ensuring that your long term goals will become a reality.
Author Bio: Will Werder uses his years of industry experience with the team at Steinepreis Paganin to contribute to a wide variety of blogs on private and commercial financial planning. He enjoys sharing his extensive knowledge helping clients and readers all over the world take control of their finances and make the most out of their wealth.