Finance and Retirement.
Finance and saving for retirement will be a life long struggle for most, but it does not have to be. The biggest and best piece of advice is to start saving and investing at an early age. Another great idea is to commit a certain percentage of your income to savings or your retirement fund.By starting to save and invest at an early age you will have the benefit of compound interest working in your favor. Also if you begin at an early age you will be a seasoned investor when comes time to invest the majority of your wealth in your later years.
At what age and how much should I save.
It is never to early to start saving, but if you start at the age of 18 you will have developed an excellent habit of learning how to save. A rule of thumb is to save at least 20% of your net income. This is the income that you take home after taxes. A young adult typically does not have enough to invest until after college, however you want to try and get 6-9 months of your monthly income saved up just in case you come in to hard times. By doing this you will not have to borrow or use credit cards to pay your bills every month if you happen to lose your job.
What should I do with my money.
After you have 6-9 months of savings in the bank and all your basic necessities are met it is time to consider the best way to get a return on your money. First are Bonds, and CD investments. They both offer a great deal of security with similar returns, and at the same time they are predictable. They are secured by the government so you will get your money back and the rate of return is stated at the time of purchase. Second is a long term saving deposit such as an IRA. You can put $5500 a year of your hard earned money into an IRA tax free. The only time you would have to pay taxes is if you make a withdraw before retirement. Remember diversification is the key in building a safe and healthy retirement fund. More to come on what to do with your money in my next blog but for now check out this site for more on what a beginner investor should do with their money.