Only 22% of Americans feel their worst financial misstep is failing to appropriately save for retirement. That percentage is not as large as one might expect. Yet an informal survey of young adults reveals there is little understanding around financial planning. What does a healthy budget look like, for example? Here is a brief guide on what the average 30- year old needs to know to be considered financially savvy.
Planning For Retirement With a Sound Investment Plan: Is It Possible For Today’s Young Adults?
About 60 years ago our grandparents were able to work for one employer for their entire career and retire comfortably on a pension provided for by that company. Not so today. The news abounds with dire warnings about the state of Social Security benefits for seniors today. There is a bleak outlook on what Social Security benefits might look like in another 30 years. The common refrain for young adults is to rely on their own retirement planning.
What Does a 30-Something Need to Know About Investment Plans?
The main point that a 30 year old needs to understand about investment plans for retirement is that it is a marathon, not a sprint. It is better to start young so that your money has plenty of time to grow. Clearly, it would have been great to start immediately at 18 years old, but few people are so future-focused at that age. What matters is that you begin as soon as you are able.
When the investor is younger, it is generally recommended to diversify your stocks into risk-levels. A larger portion of higher-risk investments is recommended because it is believed that there will be a bigger payoff over time. The ‘risk’ refers to the highs and lows of the market. If one were to lose money, then they have a good chance of gaining it back over time. An older investor does not have the luxury of time.
What Does a Good Financial Plan at 30 Look Like?
Emergency expenses is perhaps the top concern when it comes to financial planning. No matter how old you are, or what your marital status is, an unexpected bill can derail your financial plans. The key to preventing this is to have a rainy day fund. The general financial advice of Dave Ramsey is to have an emergency fund of about $1,000 that is solely for emergencies such as medical bills, big appliances breaking, or other hard-to-foresee problems.
Many young adults have debt. It could be from a car, from credit cards, or most likely in the form of student loans. It is a common issue that will take careful planning to eliminate. However, it is also a clear indication that the young adult must get clear on where their money is going. Otherwise they will never be able to adequately plan for their future.
How Can You Get Started Right Now?
The National Endowment for Financial Education, or NEFE, found in one of their studies that only about 24% of Millennials can be considered to have a basic financial literacy, let alone understand investment plans. What about the remaining 76% who are struggling? The signs of financial troubles are clear, and all deal with a lack of money for basic necessities. The best thing a young adult can do is to seek out the knowledge they need to get on track.
Financial literacy is not often taught in schools. It is up to a person’s parents to teach these necessary facts. If the parents are unable to then the person must learn these things on their own. There are plenty of respected authors on bookstore shelves detailing financial plans, investment plans, and retirement planning. Take it upon yourself to become educated on your financial preparedness.