3 Tips That Can Make Young Professionals Save & Invest Better
We’ve heard this for ages – save first and spend later. But is it relevant today? Most youngsters seem to disagree. They’re mostly of the opinion – why save and invest now when we have a whole life ahead of us?
Well, my friend, the stark reality is that regardless of your age, ‘the earlier, the better’ is the thumb rule of investment, and we recommend not ignoring it. We understand that it’s easier said than done. After all, you have the pressure of loans, rent, and an uncertain future ahead of you. But the good news is that you don’t have to worry since there is a solution. Yes, it’s possible.
How? Hop on and let us show you.
Save with discipline
We know that you’re just starting your career and have numerous financial obligations. But you must begin saving at least 20% of your gross income. You can always increase it at your convenience, but be consistent on a minimum of 20%.
In fact, why don’t you consider an automated saving strategy! It can help you save without spending too much time deciding on the “where” and “how” factors. You can also consider splitting your direct deposits and include dedicated savings account in your portfolio. Just invest in low-risk shares, but make it a practice. This seed money will reap your fruits in the future.
Did your employer stop contributing to 401(k)? Compensate for it
Many of you might have witnessed companies reducing or suspending their contribution to 401(k) to save some cash. But this isn’t a feasible approach for you. It might reduce your retirement fund, and lead to long term non-repairable damage.
So, if your employers take their hands off the matching game, we strictly recommend that you compensate for it at your end. Remember, this small contribution will reap a considerable retirement benefit for you. So if you can, go the extra mile and increase your contribution to it a little. This will compensate for the damage done by your employer.
If you get the chance to add Roth 401(k) or Roth IRA to your 401(k) balance, we suggest you immediately go for it. This will lead you to a tax-free withdrawal during your retirement. You should also give a shot to a normal brokerage account.
Though you won’t get any tax benefits, you can still have liquidity and an opportunity to grow. The bottom line is that you should have a diversified investment plan so that you can balance your risks and returns.
Investment always plays the role of a catalyst to secure future life. Cutting down on expenses or increasing earnings might flourish your present, but your future will be secured only through investments and thoughtful savings. So make a plan and start early to enjoy a peaceful post-work life.
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