Hi there! If we haven’t met yet, my name is Kara Herbert, the newest Wealth Advisor to the “HFG Advisory Team”. One of the projects I am currently spearheading is working with our “NextGen” Millennial clients. My goal is to guide and educate the next generation of investors. So here is the first of many tips and tricks you will hear from me as you begin your journey towards financial independence.
As the Millennial’s version of retirement has already begun to change, we need to prepare at a much earlier age than past generations.
Getting a raise or bonus this year? Consider utilizing this new-found money to help accomplish some of your 2018 financial goals! Below is my “Top 10” to checklist for any millennial in the initial stages of taking control of their finances.
- Pay off any revolving consumer debts. Prioritize from smallest balance and highest interest rate to largest balance and lowest interest rate. Structured, low interest and tax-deductible debt is considered “smart debt”. A 5% or higher interest rate is the cut off, in my opinion.
- Consolidate and/or refinance multiple debts to lower interest and reduce monthly payment(s).
- Establish a reasonable budget and STAY ON TRACK! Break down your monthly spending into fixed and discretionary categories (ask about our budget tool!).
- Establish a comfortable safety net (sleep tight at night money) in checking or savings. The rule of thumb is 3-6 months of monthly budget.
- Participate in a 401k or 403(B), at least up to your company’s match (don’t give away free money!). If you can “max-fund” a 401k ($19,000 for 2019) that is great! Any contribution made on a pretax basis to a 401k will also reduce the amount of taxes you pay in the year you contribute! Some plans allow Roth contributions as well. The government incentivizes you to save for your own retirement by offering various tax savings investment programs. Take advantage!
- Max out a Roth IRA ($6,000 for 2019) and contribute monthly ($500.00 per month to max fund in a calendar year). A Roth IRA potentially grows TAX-FREE and may provide more investment options than an employer’s 401k plan.
- Set up monthly contributions on an automatic basis. Dollar Cost Averaging is a sound strategy and this way, investment savings become a part of your monthly budget.
- Start saving/investing outside of retirement accounts for short (1-5 year) to intermediate (5-10 year) term goals such as buying a home, getting married and other adult…things…
- Own vs. rent. This depends greatly on your personal goals, career path, location and housing market.
- Consider, dare I say it, life insurance. Even though you are young and most likely still mighty, there are benefits by starting early here (lower cost and some policies offer cash value accumulation over time).
Questions about any of the “Top 10” or your specific situation, give me a call! I am all ears!
All the best,
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.