Warren Buffet is one of the greatest investors the world has ever known. By the age of 12 years, he was already earning more than his school teacher.
When he was 14 years of age, his parents took him to New York. His parents asked him what he wanted to see in New York. They were expecting to get answers such as the Statue of Liberty or Times Square. Instead, young Warren Buffet said, “the New York Stock Exchange.”
Warren Buffet could be an exception because, by the age of 14, he already knew what he wanted to do in life. However, most people know what they want to do in life by the time they are in college or finish college. A lot of people choose a career path around 20 years of age, or older!
Follow Your Dreams Early
Whatever career path you decide to choose, your should start early on. Whatever you want to do in life or whatever you want to become in life, start working on it early.
If you want to become an investor, business owner, or champion golfer, start working towards that goal as early as you can. If you want financial freedom, start working towards that goal as soon as you can.
You will have to equip yourself with the skills and knowledge to help you succeed. It often takes years to gather resources that will help you become a successful investor or business owner.
In case you are a parent and have seen a knack for investment and business in your kid, you can help them with financial planning. Starting them off early as a young investor or entrepreneur can put them ahead later in life.
If you are a college student or a recent graduate, it’s the perfect time to start investing or building a business. The financial planning tips explained in this article are aimed at parents, young adults, or anyone looking to achieve their dreams.
How Early Should I Start Investing?
The short answer is that it is never too early to start investing. Due to how compound interest works, you will make more money the longer you have money invested.
The youngsters are in the juncture of life where they have just recognized the value of money and the importance of saving for their future. According to the United Nations, people between the age of 15-25 years are youngsters.
However, people between 18-30 years of age can also fall into this category. This is the time characterized by confusion and stress. One of the reasons behind this is money. Things like how to make money, where to spend money, how to invest, or manage money are often at the root of this stress.
According to Robert Kiyosaki, co-author of the bestseller Rich Dad Poor Dad, financial planning can be quite daunting for those who are just starting their careers. It can also be difficult for those beginning to save for their retirement.
Quick note, if you want to be financially literate, you should definitely read Rich Dad Poor Dad. It’s a great read that can give you some interesting insight into improving your financial mindset.
In this article, we bring you the top 5 financial planning tips to set you up for great success in the future. Take a look:
1. Automate Your Contributions
For your future investments to grow, you need to start saving now. One of the easiest ways to get started with saving is by saving a certain percentage of earnings in a separate bank account.
Always pay yourself first. Put aside a portion to save when you receive a paycheck and not from what is left on your hands at the end of the month. Automation is the answer to make it a habit of saving for future projects. This will automatically increase your savings over time.
Check with your bank to see if you can automatically move a certain portion into a savings account that you won’t touch. You can also automate regular contributions to your investment and retirement accounts. Make it easy on yourself to create a habit of saving and investing through automation.
2. Take Control of Your Health
On the surface, it might not seem that health is an important topic in financial planning discussions. However, finance and investment guru and co-author of Rich Dad Poor Dad, Sharon Lechter advises otherwise. Sharon Lechter, founder of a financial education organization Pay Your Family First, says being proactive when it comes to health will pay dividends in the future. According to her, investing in your health when you’re young can reduce your potential for future health care costs.
Unexpected health care costs can wreak havoc on your savings. Chronic, preventable, health conditions can also increase your monthly expenses. By staying healthy through exercise and a healthy diet, it is possible to cut down on some of those expenses.
3. Get Out of Debt
Debt are a prominent risk factor in your financial stability in your early years. Paying down your debt can considerably reduce the amount of interest expense you pay each year. The money you would have paid in interest can then be invested or saved to grow your overall net worth.
According to Napolean Hill, author of Think and Grow Rich, people often end up paying more in interest than they are likely to earn by investing. Several studies have revealed that an average American under the age of 35 has between $23,000 and $30,000 of debt in the form of credit cards, student loans, auto loans, and other forms of personal debt.
A survey conducted by NerdWallet in 2017 showed that an average US household carries a credit card debt of $15,654. With interest rates often well of 10% to 20%, this is a significant burden. Get debt free early and try to avoid it in all situations where the leverage does not help your overall financial situation.
4. Build and Protect Your Credit
Your credit score is very important. It not only tells you whether you are eligible to get loans from financial institutions but also give information about your financial position.
This is what Erin Lowry tells in his best-selling book Broke Millennials. According to Lowry, “If you have bad credit, your entire financial health will be shaky.” Therefore, it is very important to pay your all bills including utility bills, credit bills, even the loan installment in time so that your credit score will be improved.
If your payable balance is higher that your available credit, your credit score will be badly affected, says Erin Lowry in Broke Millennials.
Having a strong credit score can help you get lower interest loans and provide more investment opportunities.
5. Buy Into Panic, Not Excitement
If the stock market sells off by 5 to 10 percent over any given month or week, don’t panic. Instead of selling, yocou should take your excess cash and buy into the dip.
Tonya B. Rapley, author of The Money Manual advises to only use your excess cash for this kind of investment. However, for the times the market is on a considerable rise, Tonya B. Rapley also advises to wait for a correction if you’re sitting on the sidelines.
The stock market will always have natural ups and downs, although the historical trend has always been up over the long term. Buying more stock when it dips is a great way to improve your long-term holdings. If you have extra cash, investing regularly is another great way to even out your investment risk.
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