When should you start planning for your retirement?
The answer is…yesterday. In short, it's never too early to save for the future.
Unfortunately, a third of all Americans don't even have a savings account and just 23% of people under age 29 have a retirement plan.
Alexa von Tobel, CEO of the personal finance site LearnVest.com, explains that most 20-somethings simply don't know enough about money. Personal finance isn't a course most people take in school despite the fact that we make, on average, 6-10 financial decisions every day.
It can also seem impossible to find extra money to set aside when so many recent college grads are drowning in a sea of student loan debt. (The average grad owes $25,000.) In fact, I read last year that for the first time student loan debt exceeded credit card debt, topping $1 trillion for all outstanding loans in the U.S.
But despite all this, there are ways to save and simple steps to put you on the right track. Von Tobel recommends a 50-20-30 rule, where 50% of your paycheck goes towards essentials—food, shelter and utilities. 30% can be spent on leisure activities, and the remaining 20% goes to paying down debt and building up savings.
Still, the first step to financial freedom is paying down debt. Von Tobel says that if you have credit card debt, you should do everything you can to pay that down before you begin to invest.
And be consistent! Pay off your bills in a timely manner and every month. Good credit is important, and it could save you as much as $100,000 in a lifetime by lowering your interest rates and raising the amount you'll receive in loans for big purchases like a home.
Think of your retirement savings like a tree—the sooner you plant it, the more time it has to grow. If you start early, it could mean the difference between a sequoia and a sapling down the road.
- Banking & Budgeting