When I speak to young women, my message is clear: be intentional about your career. Set goals that are meaningful and achievable. Develop the knowledge and skills you need to move forward, and identify role models worthy of emulating.
I recommend the same intentional approach to your financial life.? Most people in their 20s and 30s are in the asset accumulation stage of life. This is when you focus on optimizing your resources, building your savings and emergency fund, and investing wisely. Later you will shift your priorities to managing and protecting your assets. At every age, you?ll want to have the right financial and legal documents in place to ensure that your wishes are followed in the event of your death or incapacitation.
For a young person, what are the most important?financial steps?
Create a budget and track spending. It?s important to see, on paper, where your money is going.
Financial planners typically recommend these priorities for excess funds:
First, establish an emergency fund large enough to cover living expenses for six months.
Save for retirement. Take full advantage of opportunities provided through your employer, such as a 401(k). Then, consider contributions to an IRA or Roth IRA. Your financial planner can provide eye-opening statistics about the impact of postponing retirement savings even a few years. Retirement assessment tools are available online, including the BBT.com/Wealth website ? look for ?Retirement Assessment.?
Manage your debt. The following rules of thumb typically apply: 1) pay off the highest interest rate balances first 2) start with debts that have non-deductible interest (such as consumer credit card debt) 3) even if you cut up your credit cards don?t close your credit card accounts once they have a zero balance; this can actually harm your credit history 4) weigh the pros and cons before paying off a debt that has tax-deductible interest, such as a mortgage. Your tax professional or financial planner can assist you in this analysis.
Save for big-ticket items you may have to purchase in the future and just-for-fun trips or purchases. This is where your disciplined approach to budgeting pays off!
Invest wisely.? Investing is a time-consuming, highly complex field, so most people rely on an advisor or broker. I can?t emphasize enough the importance of selecting an investment adviser who is focused on your best interest. Ask up front how the person or firm is compensated and for references.? Your goal is to be able to trust your adviser to make objective recommendations. Your adviser should begin with a fact-finding session that provides insight into your financial goals, timeline and your comfort level for risk. Next, your adviser should recommend a portfolio divided among different types of investments, typically encompassing stocks, bonds or other fixed-income investments, with perhaps some portion devoted to cash, real estate or other ?alternative? investments. Ask how performance will be tracked, and request a sample of the reports you will receive.
Review your need for insurance.? Work with a trusted agent to set priorities, ranging from life insurance to disability, liability and other forms of asset protection.
Have financial and legal documents in place and keep them up to date. Your attorney can assist with a will, power of attorney, health care power of attorney and living will. You?ll find descriptions of these online, check BBT.com/Wealth.
As your assets build and you move to managing and protecting wealth, what are key strategies?
While continuing to follow your long-term financial goals, you will typically make adjustments as you go forward, such as incorporating tax planning into your investment strategy, establishing gifting and philanthropic strategies, structuring trusts or other sophisticated estate planning tools, and strengthening your approach to risk management and asset protection. Over time, your asset allocation strategy is likely to shift, reflecting increased focus on asset preservation.
Taking time now to create a financial plan means you?ll be building on a solid foundation as you move through life, optimizing your resources at each age and stage.- By Cynthia Williams,?Executive Vice President, Corporate Branding, Product?Marketing and Advertising; Chief Communications Officer, BB&T
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