As you enter the working world, it is time to get smart about finances. By making smart financial choices from the start of your working life, you can set yourself up for a great financial future.
Smart Tip #1: Protect Your Wealth with the Right Insurance
The first thing you need to do as a young adult is to make sure you are protecting your wealth with the right type of insurance. There are many types of insurance you should carry to protect yourself.
For example, you should carry renter's insurance or homeowner's insurance to protect your belongings. You invest in your belongings, so you should protect them with insurance.
You also want to protect your health and ability to make money, which is why it makes sense to invest in health insurance and to invest in disability income insurance so that you protect your ability to work and live the life you want.
Smart Tip #2: Work with a Fee-Only Financial Planner
You shouldn't try to manage your money all on your own. You should work with a financial planner. A financial planner can provide you with unbiased advice based on your best interests, especially if you work with a fee-only financial advisor. Working with a financial advisor, even on a part-time basis, will help you manage your money effectively.
Smart Tip #3: Start a Retirement Savings Account
Third, you need to start a retirement savings account. The sooner you start a retirement savings account, the more interest and wealth you will accumulate over time. You will have to save less money to reach your retirement savings goals the younger you start investing.
To start with, open either a 401(k) or a Roth retirement account, and work to maximize the money that you put into both these types of savings accounts each year. If the business you work for offers a matching opportunity for retirement accounts, be sure to take full advantage of any matching program they have in effect. A 401(k) advisor can help you make the right retirement investment choices.
Smart Tip #4: Create That Emergency Fund
Finally, it is important to create an emergency fund. The first type of emergency fund you want to have is one to cover your bills and expenses if you were to lose your job. A good starting goal is to save enough to cover your bills for three months, although over time, it is smart to build this emergency fund so that you can cover up to a year's worth of expenses.
You can also create different types of emergency funds, such as a fund to pay for car repairs or a fund to pay your health insurance deductible. It is important to start paying yourself and building up an emergency fund, so that you have cash when you need it, and don't need to go into debt when something unexpected happens in your life.
As a young adult, make sure you protect your wealth with the right insurance. Work with a fee-based financial advisor to start building your wealth. Start your retirement savings account and create that emergency fund. Start setting yourself up for a bright financial future right now.
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