Your 20s typically zoom by in the blink of an eye. So much life is happening, seemingly all at once—career, family and a whole lot of other firsts—that it can be difficult to keep your eye on the horizon for what lies ahead.
But there are real milestones coming just over that horizon and now is the time to set and meet financial goals to ensure a prosperous future.
Cultivate a healthy career
This is when your “career playbook” begins to take shape. Kick your networking and ambition into high gear and aim to deliver above the level of your job title. If starting a family is on your agenda, the more solid a foundation you have in your career, the easier it is to re-enter it down the road.
At some point, it will be time to move on from your current position—higher pay, better benefits and perhaps more flexibility will beckon. If and when you decide to make that next career move, remember that it’s all in the timing. If your job includes an employer-matched 401(k), it probably requires you to put in a certain number of years before you are fully vested.
Save for what matters most
If you needed a little time to recalibrate after college—and that time involved a few years in your childhood bedroom or parents’ basement—it’s time to officially cut that cord and begin looking ahead to the time when you may start your own family. And that usually means a down payment on a home, be it a colonial in the suburbs or a downtown condo.
While you’re setting funds aside for the future, consider a 529 plan—a tax-deferred account that goes toward your child’s college education. It covers tuition, study materials, and a variety of other related expenses. There are no penalties for withdrawals, as long as they go toward education.
Drop that debt
Millennials are credited with (and blamed for) many trends and high debt is one of them—more than $1 trillion as of this year. The average 18- to 34-year-old shoulders a personal debt burden of around $36,000, most of which is in the form of student loans.
But don’t be discouraged. Seventy-nine percent of your fellow young professionals have a plan to eliminate their credit card debt by their 40s, and you can, too. Cut your spending and allot 5 percent of your annual salary for further debt reduction.
A key benefit of this strategy is a boost to your credit score—700 is generally considered the industry standard for a healthy credit rating. Scoring models consider such factors as the number of active credit cards you have, your payment history on those cards, your credit history as a whole, and how often you check your score.
Put money in the markets
Many workers in their 20s and early 30s resist investments, largely based on distrust of the markets, borne out of the 2008 financial crisis. Sixty-six percent see investments as intimidating or scary and many instead put their money in more stable accounts such as money market funds or bonds.
But shunning the markets also delays or eliminates potential rewards, including a far higher rate of return than that of traditional financial accounts. You have the advantage of time, which allows for more risk and the positive long-term record of the markets to work for you. You also lose out on the Holy Grail of investments—compound interest.
Get ready for retirement
One of your main goals with these investments is a solid and secure retirement. It may seem a long way off, but the more you prepare now, the less stress you’ll have later.
By age 30, you want enough saved to balance your annual income (or at least half of it). This puts you ahead of the game, as two-thirds of millennials have no savings at all. If your employer matches 401(k) contributions, do your best to contribute the full amount—a maximum of $19,000 in 2019. Automatic contributions are your friend and will remove any potential stress.
No 401(k)? An IRA has many of the same features as an employer-based program, with a maximum allowed annual contribution of $6,000 as of this year.
You have plenty of time (if you start now)
The good news—these financial goals are well within your reach. Mindful planning and regular check-ins will allow your money to work for you now and in the future.
It can be daunting at first, but a financial professional can help you set priorities and stick to them. Get a taste today with our free e-book, Your Complete Road Map to Retirement.