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When someone is just getting on his feet, there are far bigger concerns than retirement savings and investment accounts. There are things that everyone needs to establish first, and while putting some money aside is always a good idea, it’s hard to do that on a large scale until someone has paid down his debts and established a career. Properly leveraging money requires more than savings; it requires a solid plan, and even if certain steps need to be delayed for a few years, people need to know what they’re working toward.
Living Below One’s Means
People who bootstrap when they’re young have a huge advantage later in life. It isn’t a good idea for someone in his 20s to rent the biggest apartment that he can afford, or to buy the most expensive car that he’s able to make payments on. That’s nothing but a drain on his time and money, and it leaves him with fewer resources to work with when it comes time to implement a more intricate financial plan.
The Power of Compound Interest When $100,000 is placed in an account that accumulates eight percent interest per year, it only takes about 30 years for that to turn into $1,000,000. While most people won’t be able to set aside that much while they’re young, it’s a powerful demonstration of how small amounts of money can grow into something much larger. This is something that anyone of any age can take advantage of.
Buying the Right Home
Even in the post-crash world of 2012, housing is expensive. Bigger homes generally don’t come cheap, but it’s ultimately costlier to buy a smaller home if it’s inadequate to accommodate the number of people living within it. People should decide whether or not they want children before they purchase a house, and if they plan to have kids in the future, they need to determine how many they want beforehand and plan accordingly.
Using Professional Investment Services
A layman can read as many books on investing as he likes, but he will never have the same depth of understanding as someone who is trained to work in the field. People on the outside may be under the impression that investing is a bit like a large scale slot machine, and that all they need to do is keep putting money in until they get a big payoff. Sound investment strategies focus on steady long-term gains, and people who work for reputable agencies have a better understanding of what will actually work than nearly anyone else. While it is possible to learn how to pick good investments without the aid of professionals, trial and error can be extremely expensive, and self-taught investing will result in some costly mistakes along the way.
Building a solid financial foundation primarily hinges on someone’s ability to plan. It isn’t something that’s terribly difficult, but it gets harder as time goes on, and picking a useless degree or having kids too early can severely limit someone’s options. It’s better to plan when there’s a bit of breathing room, and clear goals and plans make it much easier to create a prosperous future.
Lara James writes for accounting web sites and blogs. Visit this website to read more about getting your finances in order.