You’re a 20-something, earning your first paycheck, and trying to make decisions about all kinds of things. What kind of health insurance plan should you enroll in? How much should you contribute to your 401(k)? How much insurance do you need? Can you afford a new car? Should you get married? When should you start a family? Your 20s are a time of major transition with many life decisions. Our Des Moines Financial Advisors have all been there, done that, and have some words of wisdom for young adults.
What is the #1 thing a 20-something should be doing to help their overall financial picture?
Guy Leman: “The biggest thing is to start paying attention. Track where all your money goes. Start investing 10% from your very first job.”
Justin Van Houten: “Spend less than you earn. Make a budget and start tracking your monthly cash flows. It’s easy to lose track of expenses or get caught living beyond your means. Having a set budget and understanding where your money is going will greatly improve your financial outlook.”
Michele Bjorkgren: “Take advantage of your company’s 401(k) match. Based on my experience with my own 20-something, it is hard for them to pull the trigger and have dollars taken out of their paycheck - which they are so excited to be getting! Company contributions are ‘free money’ and should not be overlooked. Compounding of these company contributions in addition to the employee’s own contributions can be very powerful.”
Caleb Pearson: “The earlier you start saving, the better. Start small with a contribution to your employer-sponsored plan. Take advantage of any matching or profit sharing they may offer. Begin to research and learn about the different types of investments out there. Find an advisor who can educate you.”
What’s the biggest mistake people in their 20s make when it comes to money and investing?
Caleb: “The biggest risk out there is not knowing what you are doing and investing in something you don’t understand. Be sure to dig into the investments and understand the risks associated with them.” Having a personal and independent financial advisor can help you with this.
Guy: “Thinking you can wait until later to start saving. Your 20s are so valuable because you have the one thing that everyone wants… time is on your side!”
Justin: “The biggest investing mistake is not getting started. The most powerful investing tool people in their 20s have is their time horizon until retirement. The biggest money mistake would be living beyond your means. It’s easy for money to fly away if there’s no budget and no discipline, especially early in your 20s when you may be making a good salary and don’t have a lot of financial responsibilities yet. Many times 20-somethings rack up credit card debt. It’s important to understand credit and use it wisely.”
Michele: “Building up credit card debt in your 20s can be pretty common. It gets out of hand quick! I would also say another big mistake would be not building up a savings account/emergency fund.”
What would YOU have done differently in your 20s when it comes to money?
Michele: “I would have saved more and asked questions about my 401(k) so I could understand basic investing. I would have sought out a relationship with an advisor willing to help me understand and educate me.”
Caleb: “I would have started investing earlier too. I had debt issues early in my career and was also starting a family, which took priority in my mind. Thankfully, I am at a place now where I can put more away each month, but I missed out on a good seven years of investing because I didn’t prioritize it.
Justin: “I would have saved more and spent less. I should have spent less on ‘toys’ and things I didn’t really need. I would have started investing sooner and increased my contributions.”
Guy: “I would have invested more aggressively and left everything alone, instead of fiddling with my investments based on short-term trends. If I would have just bought and never sold, it would have turned out fine.”
There are a few common themes throughout this discussion with our team of Financial Advisors here at Compass Financial Services. If you’re a 20-something, take these steps to start building a solid financial future:
1. Set a budget and stick to it
2. Start saving
3. Seek the advice of a financial advisor
Compass Financial Services will listen to you and work with you to make a plan for your unique situation. We want to know what you want your money to do for you, your family, and your future. Give us a call at(515)327-1020 or Contact Us for a free, no-strings-attached financial planning consultation.