(Prosperity - Rebecca M Haggerty)
Your relationship with your money should evolve, just like your personal style and those darn hemlines, as you get older. We asked Ameriprise financial adviser and all-around money know-it-all Katherine Wahlberg for some tips. While finances aren’t 
one-size-fits-all (and what is, really?) here’s her take on what every woman must know to take care of herself financially.
Your 20's
These are the most important years because they help set your financial tone. Your relationship with money won’t ever go away, so you may as well work on getting it right.
1. You Are Your Own Independent Financial Person. Create a sense of your own financial self, and learn your financial personality (we’ve got some quizzes in the resource center to help you with this). It’s great to know Mom and Dad would help you in a catastrophe, but start thinking about how you can handle your own money and generate your own safety net.
And while it’s fine to ask Dad to help you with your taxes (we all have), set a goal of learning how to handle tax time on your own.
2. Stay Out of Debt as much as possible. Falling into debt in your 20s is easy, because of student loans and the fact that your career - and income - is just starting. But it’s also the time in your life when your expenses will be their lowest. Set a pattern of living within your means by paying off student loans and avoiding credit card bills. If possible, save now so you can play later.
3. Build Up A Cash Reserve. Try for at least three months of expenses, but don’t let the money sit in your checking account earning no interest. There are lots of banks out there offering excellent rates for savings accounts, with few restrictions. Wahlberg suggests not just looking at traditional banks, but also at online banks like IMG Direct and various money market accounts for the best interest rate.
4. Start Saving For The Long Term! People in their 20s feel invincible, but let’s not forget the benefits of allowing your savings to compound. [If you forgot this part of math class this is where the interest your money earns accumulates year after year like laundry on a dorm room floor]. The earlier you start saving, the more money you’ll have when you need it.
Take a look at the chart below. A Smart Woman saved as much as she could - $40,000 - from 25 to 35 - in an account with a 7 percent interest rate, compounded monthly.
By the time she retired at 65, even though she hadn't had the chance to add more to this savings account, she had $450,146 saved. Some Guy started saving at 45, and over the next 20 years he put away $100,000. With the same interest, compounded monthly, he only has $207,706 at retirement. Even though Some Guy had saved 150 percent more than Smart Woman, he ends up with over 50 percent less total savings.
Want to more on compounding? Visit The Words on The Street: Compound.
5. Match Set. If your job has any kind of matching plan for your retirement fund, take it – it’s free money sitting on the table, and part of your compensation package from your employer. Never walk away from a 401(k) because of underfunding. If you can only put in $10, $25 or $50 a month, you should do so.
Want more about 401(k)s and retirement plans? Visit The Words on The Street: 401(k) and our Survival Guide: The Retirement Maitrix.
Your 30's, 40's, 50's and Retirement -> |
