Money saving tips
Entry-level jobs and piles of student loan debt can make saving and investing a struggle for many young adults. But it’s still smart to start early in life even in a small way to develop the habits of saving and investing wisely.
Saving is simple. Of course, simple doesn’t mean easy. One way to overcome that difficulty is to focus on achievable goals. Start with a goal to save $25 per month to build up $1,000 of emergency savings in case you break your arm, your car needs repairs, you lose your job or some other unavoidable expense comes up.
If you told people that their emergency fund had to be $30,000, they would never save it. But if (their goal) is $500 right now, maybe we’ll talk again in three or four months and it will be $1,000. “Bite off only what you can chew.”
Another good strategy is to set up automatic transfers from your paycheck or checking account to a savings, investment or retirement account, so that you have to make that decision to save only once.
Get that money out of your hands before it slips through your fingers. Have it automatically deducted if you can. Don’t put yourself in that decision-making position because the odds are, you will come up with a better use of the money at that moment.
If saving now seems too difficult, make a commitment to yourself that you’ll allocate a portion, perhaps half, of any raise you receive in the future to saving. That way, you’re primed to save more as soon as your income increases. You might be able to get that raise sooner than you think. Exploring other ways to boost your income also can start you along the path to saving more.
Try to earn a little money on the side. Can you blog? Design websites? Design logos? Walk dogs? It’s amazing the number of ways that people can come up with to earn an extra $500. That really makes a difference in the long run.
Investments should be moderately aggressive and well-diversified, two goals that should be relatively easy to attain with target-maturity mutual funds or a total stock fund, total international fund and total bond fund. Pick whatever asset allocation plan has something in the neighborhood of 70 percent stocks to 30 percent bonds. That’s about as aggressive as you want to get. Some financial experts recommend a higher allocation of stocks for young people, but that a stock-heavy portfolio can be more volatile than a less aggressive approach. You make a ton of money when the market is going up, but you lose a ton of money when the market is going down. Over time, you end up with more money with a less volatile portfolio.