One of the things that frustrates me about the financial services industry is that so many people try to make things more complicated than they need to be, especially for younger folks. Which is why I want to share my 3 financial tips for young professionals.
There are people on TV who sell complexity, who think that it makes them look smart, or even necessary.
One problem (among many) with that is that most young professionals today have never had any formal personal finance education, and they aren’t used to the lingo or jargon on CNBC or the Wall Street Journal.
So they hear these terms they aren’t familiar with, and these strategies that they don’t really understand, and it leaves many feeling inadequate or unsure of what they should do.
Instead of muddying the waters more, let’s clear things up. Here are 3 financial tips for young professionals:
1. Save 20% of your income
I know, I know. 20% is a big number to reach. And it’s okay if you aren’t there today.
For those of us under 40, who have an uncertain future with social security, along with the unlikelihood that we’ll receive any sort of a pension, it means that we have to work extra hard at saving as much as we can to provide for our retirement.
Start saving what you can now, and then work to save a little more month by month. Great financial habits don’t occur overnight, so build into it and make it a lifetime habit.
2. Protect yourself on the downside of life
Everyone already knows this, but it bears repeating: bad things happen in life.
Tragic things like unexpected deaths, debilitating illness or accidents, and the list goes on. It’s not pretty to think about, but it’s a part of life. And it’s a part of life most people aren’t fully prepared for.
Take the time to think about what would happen to your family if you died unexpectedly. Yes, there will be the emotional aspect that they will have to go through. But how will it impact them financially? Without your income? Or your work around the home?
Buying the right kind, and amount of life insurance protects against an unexpected death.
And more commonly, buying the right type of disability insurance protects against an illness or accident that prevents you from working as much or at all.
Buying life and disability insurance is a great way to protect yourself on the downside of life and give you peace of mind that your family will be taken care of.
3. Buy a globally diversified investment portfolio
I am a firm believer that you shouldn’t try to chase the newest thing on the market just to get the highest returns. Doing that might give you a thrill and be fun on the way up but, will lead to frustration and an expensive education when things go south.
Instead, young professionals, who have decades of time to invest, should buy a portfolio that invests in companies all over the world, in large companies, medium size companies, and small companies.
Investing this way won’t make you a millionaire overnight. And that’s a good thing.
By buying a globally diversified portfolio, like the one I described, you will have a portfolio that is built for the long haul. It will grow as the global economy grows and isn’t susceptible to market fads.
So, there you have it. 3 financial tips for young professionals, without the jargon that makes eyes glaze over. What do you think? What did I miss? Send me an email at scott@forthrightfinanes.com and let me know.
And if you want more help putting your plan in place, check out how we do financial planning, and see if we are a fit for you