When you are younger it is difficult to think about several years into the future but it is necessary to get started. With the power of compound interest, the earlier you start saving the less money will need to save.
Where are you now
One of the first steps in your planning for the future is to figure out where you currently stand financially. Take into consideration your expenses, assets and liabilities. In many cases, as our incomes increase, so do our expenses. If you do receive a bonus or increase in pay, then try to restrain from increasing your expenses to match your income.
Additionally, as you go through your years you may experience events that affect your financial life such as getting married, having kids, and buying a home.
It may be tempting to buy the latest and greatest cars, clothes, and other items, but it is important to consider what they will really cost you, and if you can get by with less expensive items to make your money go further.
Short term and long-term savings
It is important to have money in savings. Some items can be saved for over a shorter amount of time such as cars and vacations. Long-term savings items are college and retirement savings.
What does your future hold
Along with your everyday expenses you should start saving for things that will be happening in the future. One of the first major expenses you may have is saving a down payment to purchase a home. Other events that you may need to start saving for are retirement, college savings for your children, and other dreams. Along with these you should also be putting money into savings for emergencies.
If your employer offers a retirement savings plan it is important to enroll in it. If you don’t have a plan offered at work check into an Individual Retirement Account (IRA). The more time your account has to grow, the less you need to invest in it. Also, the more time you have, the more risk you can take. In the event of a major loss you will have time to make up from the loss.
It is difficult to know what your future holds and what it will cost you, but it is important to put money aside for the expected and unexpected. Some people spend most of their money on everything they want because they don’t know what will happen in the future. Although it is important to enjoy yourself it should also be a priority to save for future events.