PLANNING FOR YOUR FINANCIAL FUTURE
One of the best things about investing in your 20’s is that time is your best friend. If you start investing for retirement during these years, you get a longer time period to accumulate long-term gain and compounding interest. But where do you start?
Most 20-year-olds have their first job right out of college, and that’s the best place to start. Most companies offer employees a 401k plan. This money is taken right out of your paycheck pre-tax, so you don’t even miss it. Many companies even give a match up to a certain percentage. This is an added bonus, since the company is actually giving you free money that can give you a real boost. If your company matches, you should definitely take advantage of it and try to put in up to the amount the company matches, even though it may be difficult to put in the maximum amount.
Another way to get involved is with mutual funds, which allow investors to add funds little by little and watch them accumulate over time.
But what exactly is a mutual fund?
A mutual fund is like a basket of stocks and companies in one sector. Instead of trying to pick a company to invest in, you can choose a basket of stocks. Every mutual fund family has a different asset class, and investors can be moderate, conservative or aggressive and choose stocks within those classes. For example, more conservative investors would choose stocks in the utility sector, which typically don’t vary a great deal. A more aggressive investor would choose to invest in things like tech stocks and those that have the chance to explode.
When in your 20’s and 30’s, you want to be as aggressive as possible because time is on your side. Contributing more when you’re younger and single, gives you more when you’re older. Once you have a family and a home, you can cut back a little because you have more expenses, but while you’re young and have time to ride out the stock market’s ups and downs – you may want to consider putting a larger percent of your investments into stocks and mutual funds.
Of course, you also have to try to pay off debt at the same time. It’s crazy to invest in something that’s making four or five percent and have debt on a credit card at an 18 percent payoff rate. Once you pay off your debt, begin accumulating money in both savings and retirement accounts.
By following the basic tips above, if you’re an investor in your 20’s or 30’s you should be more than ready for retirement when the time comes!
Questions about investing or you’d like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial? Call 732.312.1500, or you can also obtain more information on our website at FIRSTFFCU.COM, under the Investment & Retirement Center tab.
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