Are you unsure how to utilize your wallet, make your money work for you or what steps to take to become a financially established adult?
If yes, know that wealth does not typically come naturally. Half of American adults lack financial literacy and over 70% are anxious about their financial situation. Becoming a financially established adult may seem daunting, but the steps to get you from unsure to ready for retirement are simple and lasting. Why not start now?
Pay yourself first
Consistently paying yourself first is a great step towards the goal. This is the underlying concept of continuously putting money into your future, through savings, funds, investments and more, as the foundation for durable financial stability. Paying yourself first starts with making smart financial moves now.
Diversification
Investing in a mix of asset classes such as stocks, bonds, real estate or certificates of deposit helps to minimize risk and maximize returns. Dividend-paying stocks and bonds provide regular income, which can be reinvested to compound wealth. Diversifying where you invest is essential to maintaining lasting stability in a volatile market.
Long-term care insurance
As a financially stable adult, start thinking ahead if you aren’t already, and set up long-term care insurance. As health care costs rise, having insurance ensures that medical needs are covered without depleting savings. Review your estate planning, including wills and trusts, to ensure your wishes are respected and your assets are passed on efficiently.
Retirement contribution strategies
When it comes to retirement, take advantage of higher contribution limits for those over 50. Maximize contributions to 401(k)s, IRAs and catch-up contributions to secure a comfortable retirement. Use IRAs, Roth IRAs and 401(k)s to defer taxes, allowing your investments to grow more efficiently. Consider how traditional vs. Roth accounts can impact your tax situation.
Don’t let taxes on your retirement contributions confuse you. Regardless of your preference to pay taxes now or later, making that decision early will help determine which tools are best for you. For example, if saving tax payments until retirement is your chosen method, going for a 401K plan with your company is a notable option wherein your company will typically match a percentage of your annual input.
Protect and maintain your wealth
Assessing when to insulate against risk and reward is crucial to both keeping up to date with your investments and balancing life and finances at any stage. As you age, the more likely you are to fall against financial risk.
Money maintenance
With future and present intentions set, money maintenance is the next big hurdle. Secure spending, your financial best friend, is the principal form of maintaining and safeguarding your wallet while avoiding fraud and theft. This consists of using tools and behaviors that help ensure wise spending while simultaneously avoiding fraud and theft. Resources for this include personal action, avoiding suspicious card readers, protecting your account numbers and ensuring your cards have chips.
Monitoring your credit score allows you to maintain or improve it, which can lead to better loan rates, credit cards and financial opportunities. Good credit health is crucial for securing favorable terms on loans and mortgages. All in all, secure spending is the basis for both maintaining fiscal security and climbing the financially established ladder.
Digital tools
Financial institutions like America First Credit Union offer digital tools and broad resources for successful spending and saving to help you make informed and protected decisions. Tapping into those tools and resources can help you to tell exactly where you are in your financial journey, if you are financially established or if you need to take those first steps to pay yourself and, in turn, your future.
Editor’s note: Mike McKee is Arizona market manager at America First Credit Union. He’s based in Gilbert. Reader reactions, pro or con, are welcomed at AzOpinions@iniusa.org.
