Financial responsibility is a skill that everyone should cultivate, regardless of their age. However, as a young person, it is an opportunity to set the stage for a financially secure future. The choices you make now can have a profound impact on your long-term financial well-being. Being young gives you a chance and time to set goals and make decisions that can impact your financial journey significantly. In this article, we’ll share some tips on financial goals that every young person should consider on their journey to building wealth.
10 Financial Goals For Young People
- Create an emergency fund
- Budget and track your expenses
- Save for retirement
- Pay up debt (if any)
- Set SMART financial goals
- Invest in financial education
- Build multiple income streams
- Protect your assets
- Review and adjust your financial plan regularly
Create an Emergency Fund
One of the first financial goals you should set as a young person is to establish an emergency fund. Unexpected expenses and emergencies will come up but with an emergency fund, you are sure that you won’t be left hanging. Whether it’s a medical bill, phone repair, or sudden job loss, having an emergency fund can prevent you from going into debt to cover these unexpected costs.
Financial experts typically recommend saving three to six months’ worth of your living expenses in your emergency fund. This might seem like a lot but you can start small by setting aside a portion of your income each month until you reach this target. Even having as little as #100,000 in your emergency fund can give you peace of mind.
Budget and Track Your Expenses
Creating a budget and tracking your expenses is a good step towards financial responsibility. A budget helps you understand where your money is going and allows you to distribute funds for different purposes, such as savings, bills, and entertainment. There are numerous budgeting apps and tools available online that can simplify this process for you.
Start by tracking your expenses for a month to get a clear picture of your spending habits. Then, create a budget that aligns with your financial goals. Remember to review and adjust your budget regularly as your income and expenses change over time.
Save for Retirement
As a young person, retirement may seem like a distant concept but saving for it early can make a massive difference in your future. Take advantage of the Retirement Savings Account (RSA) as it applies to you and any other account that helps you reach that goal. These accounts offer tax advantages and compound interest, which means your money grows over time.
Also, consider contributing a percentage of your income to your retirement account, and aim to increase your contributions as your income grows. Many employers offer to make contributions to retirement accounts as part of your employment benefit, so be sure to take full advantage of it.
Pay Up Debt (If Any)
If you have high-interest debt, such as personal or business loans, prioritize paying it as soon as possible. High-interest debt can quickly become a financial burden, eating away at your income as interest charges increase.
Create a plan to tackle your debt systematically. Start by paying off the debts with the highest interest rates first while making small payments to others. As you eliminate each debt, allocate the extra funds towards the next highest-interest debt. This approach, known as the debt snowball or debt avalanche method, can help you break out of debt faster.
Investing is a powerful way to build wealth over time. While it may seem complex and intimidating at first, it’s important to understand that investing is not just for the wealthy. You don’t have to wait till you start in millions. As a young person, you have time on your side, which can work to your advantage through the power of compounding.
You can consider investing in a diversified portfolio of stocks, bonds, and other assets. Start with small amounts and gradually increase your investments as you become more comfortable with the process. Many online brokerage platforms and apps offer user-friendly interfaces and educational resources to help you get started.
Set SMART Financial Goals
It’s not enough to set financial goals, you should set specific goals to help you achieve success. Your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. Whether it’s saving for a down payment on a house, paying off debt, taking a dream vacation, or saving for a new degree, having clear objectives will motivate you to make good decisions.
Break your long-term goals into smaller, actionable steps. For example, if your goal is to save #500,000 for a new degree in two years, calculate how much you need to save each month to reach that target.
Invest in Financial Education
Financial literacy is very important. It is an invaluable asset that can help you make informed decisions about your money. Take the time to educate yourself about personal finance topics, such as budgeting, investing, taxes, and retirement planning.
You don’t need to become a financial expert overnight, but building your knowledge gradually can help you make better financial choices. Consider reading books, attending seminars, or taking online courses to increase your knowledge. Also, reading blogs like the Financial Options blog is another way to learn.
Build Multiple Income Streams
This particular goal is very important. In today’s job market, having multiple income streams is a good way to meet your needs and get added financial security. Consider exploring opportunities for side hustles or freelance work in addition to your primary job. The extra income can help you achieve your goals faster and provide a buffer in case of job loss or economic downturns. It’s easier to handle more work responsibilities as a young person. Find a way that works for you and don’t forget to maintain a balance so you don’t lose sight of yourself.
Protect Your Assets
As you begin to accumulate assets and wealth, you will need to protect them. This means having the right insurance coverage, such as health insurance, auto insurance, and house insurance. Additionally, consider creating a will and establishing an estate plan to ensure that your assets are distributed according to your wishes in case of unforeseen events. No, it’s not too early.
Review and Adjust Your Financial Plan Regularly
Planning for your finances is not a one-time activity. Things are subject to change and anything can happen over time. Make it a habit to review your financial goals and progress regularly. Adjust and change your strategies as needed to stay on track and be open to any new life circumstances or opportunities.
Establishing solid financial goals as a young person is not easy especially as you’re still hustling but it is important if your goal is to build wealth and succeed financially. The chances of you stumbling into wealth are very slim. That is why you need to have goals and plan towards achieving them gradually. The choices you make today will shape your financial future, so start building your financial foundation now.