Financial Freedom at 25
The beginning of a new year is the perfect time to evaluate your stage of life and look towards the future. Creating a solid financial plan is crucial to achieving one’s financial goals, whether short- or long-term. It’s advantageous to start planning early to increase the likelihood of reaching those accomplishments.
“Financial planning is an investment in the future,” said Jeremy Bristow, Assistant Vice President & Cashier at United Bank & Trust. “The choices young people make today will lay the foundation for the wealth and security they will enjoy tomorrow.”
For people under the age of 25, it’s difficult to know where to start. Below is a list of seven steps young people should take as they embark on their own financial journey.
- Create a budget. Next, determine where your money is going right now. Write down your fixed monthly expenses so you know how much you’re spending each month, then calculate how much you have left for savings, entertainment, and other items. If you’re stretching from paycheck to paycheck, look for areas where you can cut back on spending.
- Make a plan to eliminate debt. Paying off large bills, such as credit cards, student loans, and car loans, can free up money for other priorities. Once you’ve completed your budget, look at your debts and make a plan to eliminate each one as quickly as possible. Use the debt snowball method to pay off your debts, beginning with the smallest one and ending with the largest one, to expedite your debt payoff journey.
- Start building your credit history. Debt is an important element of your credit score. Making timely monthly payments on your pre-existing debts will help you build your credit score so you can receive the best possible terms on future large expenses, such as a home mortgage.
- Start an emergency fund. Building an emergency fund will take the sting out of your finances when unexpected expenses pop up. Most experts recommend having three to six months of living expenses in an emergency fund.
- Save for retirement. If your employer offers a 401(k), it’s important to take advantage of this opportunity while maximizing any matching contributions. Funds will be automatically deducted from your paycheck into your 401(k), which will keep your contributions consistent. You may also want to set up an additional Individual Retirement Account (LINK) for additional retirement savings.
- Meet with a financial advisor. Seeking expert advice can not only help you look at your finances from a different perspective, but it can also help you identify areas that your finances can be adjusted to maximize your savings for the future.
Contact United Bank & Trust at 641-753-5900 or at [email protected] to learn more ways you can ensure your financial freedom at an early age.