Young professionals have interesting challenges including career path, paying off debt, raising children, saving for retirement, and possibly assisting aging family members, among others. It gets even trickier when you have to do it all during a pandemic. Here are some financial tips to keep you on track.
One of the most important things you can do as a young professional is recognize that priorities shift over time. Flash priorities may emerge as life milestones occur and are inter-related. It might be a job change, buying a home or starting a family. Here are some priorities that you might bump into in the near future:
- Health and family – Insurance plays a key role, especially during a pandemic and beyond
- Reducing risk – Financial, business and personal
- Advice – Technical (how to) and behavioral (help me make a decision)
- Relevant solutions – Tax reduction, debt and credit, cash flow, etc.
- Investment outcomes – Increasing returns and reducing risk
- Legacy – Estate planning, and how your goals and values are in place for your family, communities and causes
What Issues Matter to You?
- A healthy financial lifestyle – What is needed to help you demonstrate high financial literacy?
- Preparing for a career shift – Nine out of ten Millennials expect to stay in a job for less than three years. Make a plan and be ready for the future.
- Managing wealth in relationships – Financial decisions are a source of stress for eight out of ten Millennial couples. Have the talk with your partner and set yourselves up for financial success.
- Investing in your development – Seven out of ten college graduates have student loans. A financial plan is key to paying off your debt, so why wait?
- Buy versus rent decisions – Millennials are postponing home ownership. If owning a home is in your plan for the future, start preparing today.
Create a Financial Checklist
Update the Spending Plan
This is also known as a savings plan or budget. You know the important rules – spend less than you make (live within your means) and pay yourself first (convenience of payroll deductions to your 401(k) and savings plans). Remember to make adjustments. For example, the pandemic will end someday. How will your plan change – more income, vacation expenses, childcare, housing, etc.?
What opportunities are available at the current low interest rates? This includes refinancing, debt consolidation and financing new acquisitions. A goal is to lower your interest expense over the life of the loan. Consolidating a high interest short-term loan into a low interest long-term loan doesn’t always make sense. Here’s an alternative: Consider making extra payments if you’re consolidating an 8% ten-year loan into a home refinance loan at 3% for thirty years.
Start Accumulating (and Keep Going!)
A savings habit developed early will make your life easier and if contagious, is a good lesson for your kids. It’s never too late to start saving. Make a plan and start today.
Here are a few areas often overlooked, or possibly timely. Diversify concentrations of wealth such as employee stock options. Review and adjust life, disability and personal insurance as needed. What tax reduction opportunities exist related to previously mentioned stock options, or from tax loss harvesting and donating appreciated assets to charity? And what actions should you consider related to election results?
Life can be complicated, especially when one financial priority can have impact on others. Seek sage advice as needed and secure your future wisely.