As a responsible adult, it’s important to prepare for the future. You need to find a way to ensure that you’ll have the basic needs when you get older, and you’ll need money to obtain those needs. While you can work every day, eventually, you will reach an age where that’s not so easy, so you must plan for long-term stability. Here are five ways that you can start preparing today.
1. Boost Your Retirement Savings
While it seems easy in principle, saving is more challenging for a lot of people. In fact, 6 in 10 Americans don’t even have $500 in savings. They certainly don’t have enough to retire. Although it may seem like a far way off, it’s essential to start saving for retirement as early as possible.
Luckily, there are several methods to boost your retirement savings. Step one: Open a high-yield savings account. Just by simply adding funds to a high-yield savings account, you can earn money. You can then put money into a 401k or a separate retirement fund. To get the most out of these accounts, increase your contributions over time and avoid early withdrawals because you will face tax consequences.
2. Buy A House
It may initially seem backward, but you can improve your long-term financial stability by purchasing a house. To secure a home, you will need a conventional mortgage loan — which typically requires a 3% down payment — or you can find a specialty loan. If you’re moving to a rural area, then you may qualify for a USDA United States Department of Agriculture loan, or, if you are a veteran, you may secure a VA loan, both of which require a 0% down payment.
In either scenario, you’ll build equity as you pay off your mortgage loan, and your property value will inevitably increase. If you decide to sell down the line, you’ll likely make a profit. You’ll likely also be eligible for tax benefits so you can save money and put it into your savings accounts.
You can also follow in the footsteps of many others looking for long-term stability by investing your money. Some of the most popular investments include:
- Mutual funds;
- Real estate;
Real estate is a good idea if you’re looking for long-term returns because, like your house, these buildings will appreciate and become more valuable over time.
Create a diversified portfolio just in case one of your investments falls through, and don’t place all of your eggs in one basket. When in doubt, contact a financial advisor if you’re unsure about specific investments.
4. Budget Your Money
You may think all is lost if you have little money left over from your paycheck. But really, you may just need to be smarter with your money and create a budget. Review the money you have coming in each month, and write out your expenses including utility bills, car loans, coffee money, and restaurant tabs. Add it all up. If you have very little left at the end, you may need to cut some unnecessary items out. Make lunches and brew coffee at home instead of going out. Find ways to save on utilities like turning off lights when you leave the room or cutting your shower time down.
You can hold yourself accountable by setting up your paycheck so that a certain percentage goes directly into your high-yield savings account. Don’t use that money unless it’s a true emergency.
5. Pay Your Debt
Finally, you need to eliminate your debt. There are two tactics you can use when paying debts. For one, you can pay off the largest debt to get it out of the way. You can also follow the snowball method, where you pay the minimum amount due on all debts but focus on the smallest debt. Pay that off and then focus on the next highest debt. Every time you pay off a debt, you will be encouraged to continue with the next one, hence the growing snowball. Stick to this routine, and you will eventually be debt free.
These five tactics can begin your journey to financial freedom and the keys to a comfortable retirement.
This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.