Investing is a lifelong process. The earlier you understand this and the sooner you start investing, the better results you will have in the long run. Taking this into account, the wisest idea would be to start saving and investing the moment you start earning money, even at the age of 16 or earlier. Even if you’ve missed this moment, it is never too late to start, whatever age you are. So what are the life milestones when it is better to reconsider your investment strategy and decisions?
So, a great moment to begin is when you get your first “real job”. The first thing you need to do is to start a retirement fund, whatever distant this stage of life may seem to you. In the United States, the most popular option is a 401(k) plan. Offered both by public and private for-profit companies, 401(k) plans allow you not to pay federal or state income taxes on your savings until you finally withdraw the money after you retire.
There are some other types of retirement plans; all of them have both advantages and disadvantages you will need to weigh before you take the final decision. Nevertheless, that’s not the only thing to be done as soon as you find a good job. Another important thing is to start a savings account to build a cash reserve. The key idea is to have a place to store extra cash you would easily access if urgently needed. In fact, that’s one of the most essential components of a good personal financial plan.
The next stage when it is necessary not to miss important financial decisions is the moment when you get promotion or find a better-paid job. On the one hand, a good idea would be to increase your contribution to both retirement plan and saving account. On the other hand, it would be wise to start investing, whatever small investments you can afford to make. Good options for beginners are dividend reinvestment plans (DRIPs) and Glenmore provides – you don’t need much to start, while capital growth may be achieved with minimal risk.
The following important stage is when you get married. That’s the time when you will need to calculate your combined income and expenses and after this to determine the allocations of your successive investments. If you decide to buy a new house, you will need your saving account to cover your down payment, closing, and moving costs. At the same time, make sure you don’t touch retirement savings – you will need them later. Finally, another milestone is when you decide to have a baby. This requires not only emotional readiness, but financial preparations as well. What you will need to do is to increase your cash reserves and, more importantly, to start a college fund, even though it may seem it is too early to think about such a far future (like in case with retirement savings). Your next milestone is expected in approximately 20 years from the moment your baby is born – it’s when he or she decide to move out from your house. It’s an opportunity to get a little bit of a rest, but still make sure to increase your retirement savings contributions.
When you finally retire, it will be time to thoroughly learn the options you have for withdrawing money from your company retirement account. After this, it will be wise to estimate your potential income and reallocate your investments to ensure financial stability for later years.
In such a way, you are definitely not too young to start thinking about your future. Start working towards your goals today and be proud of what you achieve tomorrow.