Working with a Financial Planner is often seen as something older adults do as they approach retirement. Unfortunately, this isn’t the most complete characterization of our profession. While financial planning is helpful — even essential — for those nearing retirement, Wealth Managers are equipped to work with people at every stage of life.
If you’re in your 20s, it is not too early to start working with a Financial Advisor. In fact, this is the perfect time to find one and start taking your financial future seriously. Making smart financial choices in your 20s can save you a lot of stress and literally change your life. And since finances are relatively new to you at this age, asking a professional to guide you is endlessly wise.
Here are some of the key ways a Financial Planner can help guide you in your 20s.
Creating a Budget
Perhaps you had a budget as a college student, but chances are, it looked quite different from the sort of budget you need in your 20s. You may initially think of a budget as restrictive rules that keep you from over-spending, but a Financial Advisor can help you see it as more than that. A budget is a short-term plan for your money, which helps you meet your financial goals.
Budgets are very personal. They depend on your income, debts, goals, and priorities. While there are numerous budget templates and ideas online, a Financial Planner can ensure your budget fits your specific needs perfectly — which means you’re more likely to stick to it.
Paying Off Debts
Most people in their 20s have some student loans, and they can feel insurmountable. With so many different student loan payoff options available, it’s not easy to know which one is right for you. A Financial Planner can help you choose a loan payoff strategy that minimizes the interest you pay over time, is realistic for your income, and sets you up for a healthy financial future. As your income changes over the coming years, your advisor can re-visit and restructure your debt payoff strategy, as needed.
Maximizing Employee Benefits
Most employers offer benefits such as a 401(k) match, health insurance, HSA plans, and life insurance. Knowing which of these benefits to sign up for, how much to invest in employer-matched retirement plans, and how to obtain health insurance most affordably is not easy.
These are all questions your Financial Planner can work through with you. They’ll help make sure you get the very most out of your employee benefits. For example, if your employer offers a 401(k) match of up to 3%, your Financial Advisor may encourage you to invest up to that 3%, and then find the best place to put your remaining retirement funds. If your employer offers several different health insurance plans, your advisor can help you choose one that is financially beneficial but still offers the coverage you need.
Sometimes employers have human resource advisors who help employees navigate their benefits packages. However, since these advisors work for your employer, they do not always have your best interests as an employee at heart. It’s better to have your own, independent Financial Planner to guide you in these decisions.
Everyone should start investing in their retirement in their 20s, if possible. Thanks to compounding interest, the money you invest in your 20s will be worth significantly more than the money you invest in your 30s or 40s by the time you retire.
Investing can feel overwhelming when you are new to it, which is one reason many 20-somethings put it off. A financial planner can teach you the basics of investing and help you create a smart investment plan, not only for retirement but for other future savings goals, too.
When you have a specific goal to work towards financially, you’ll find it easier to save, follow your budget, and make wise, income-related decisions. A Financial Advisor can help you create both long and short-term goals. Defining these goals will help you carve out a more defined path for your career and life in the coming decades.
Your goals can be personal, too! Goals like “I want to retire by 60” are useful, but your advisor can also help you set motivational goals like “I want to afford a sports car by age 32.” A good mix of personalized goals will give you something to keep working towards.
It’s never too early to start working with a Financial Planner. At RLJ Wealth, we have helped many 20-somethings make solid plans for their futures. If you’re in your 20s and seeking professional guidance, contact us to schedule a personalized consultation.