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Planning & Economy

Getting Started on your Financial Journey

August 22nd, 2023

Recommended for Investors in their 20s

Getting started on your financial journey early in adulthood can set the foundation of your financial path for the long-term. When you graduate from college and/or find your first job as adult it’s important to start working on meeting goals that can set your finances on the right path. We recommend working on the following seven items in your 20s to build your financial foundation now:

1. Live on a budget and fully understand your monthly spending

Review your net income, which is the amount of wage income that goes into your bank account after taxes and other withholdings. Go through your fixed expenses which are expenses that you have to pay and typically stay the same amount every month such as your rent or mortgage payment, your utility bills and your insurance costs. Your discretionary spending would be considered spending that varies and that may not have to be spent every month. To manage your budget you may want to set limits on your discretionary spending and even some of your fixed expenses to be sure you are not spending more than you earn every month. You can manage this through an excel spreadsheet or one of the helpful budget apps that have been created. My favorite is the Mint app.

2. Start saving for an emergency cash fund

Once you start working, your spending will be dependent on your current income. If you were to lose your job or have a temporary loss of income, you want to be sure you can continue paying your fixed expenses through this period of time. We recommend you have six months of cash set aside just in case you go through a period of time where your income stops. You may also want to consider your larger spending goals and start saving for those goals as well.

I recently read an article titled: The 22 Most Foolish Financial Decisions Ever Made. The 22 Most Foolish Financial Decisions Ever Made | NewRetirement. Number 2 on the list was Too Much Housing Debt and Spending. A couple bought a house with a 3% down payment, had too much credit card debt, no savings and the wife lost her job. They had to file bankruptcy and sell their home. The second time around they had no credit card debt, put a 20% down payment on their home and paid it off in 15 years. While some people may not be able to do a 20% down on their first home, having a sufficient emergency cash fund would have more than likely avoided the issues this couple had in the purchase of their first home. Being prepared for the worst can keep you out of trouble if the worst does happen.

3. Have a plan to pay off any unsecured debt by the time you’re 35 years old

Unsecured debt is any debt that doesn’t have collateral associated with it such as credit cards and student loans. This debt is common for younger individuals but can inhibit a good savings plan and could potentially inhibit you to meet goals that are important to you.

4. Start saving for a down payment for a home now

Most first-time home buyers don’t have the ability to put down 20% of the overall cost of the home, but it is recommended to have 5%-10% of the down payment of your first home. If you purchase a $350,000 new home that would mean you would put down $17,500 for a 5% down payment or double that for a 10% down payment.

5. Know everything about your employer benefits

You can save a bundle of money when you maximize your employer benefits. For example, you could potentially purchase long-term disability insurance for a fraction of the cost going through a group plan versus a private plan. You can also save on life insurance as well.

6. Contribute to your employer retirement plan

If you have the opportunity to save in an employer retirement plan, you can save up to $22,500 a year versus only $6,500 a year into an IRA. Plus, many employers offer a contribution match or profit-sharing contribution which means your employer will add more money to your plan based on your contributions. This is a great opportunity to save for retirement and can add up very quickly.

7. Get a Power of Attorney

What many younger adults don’t know, is that once you turn 18 years old you are age of majority your parents no longer have the ability to give health care directions for any circumstance. If you have a special health circumstance where you need medical attention and you are incapacitated, no one can give instructions except you. It’s important to have a power of attorney in place for health care, in case your parents need to step in and make health care decisions on your behalf.
Getting started on the right path for your financial future is important and can save you a lot of time and money in the future. We’re stand ready help you and your family if you’re just getting started and need some guidance.

Christina Jones
Wealth Manager, RFJS
Partner, Windsor Wealth



401k plans are long-term retirement savings vehicles. Withdrawals of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2 , may be subject to a 10% federal tax penalty.
Matching contributions form your employer may be subject to a vesting schedule. Please consult with your financial advisory for more information.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does constitute a recommendation. Any opinions are those of Windsor Wealth and not necessarily those of Raymond James.
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