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Pradeep Audho
09/06/2007
Young adults in their twenties and early thirties—so-called “post
boomers†or “Generation Xersâ€â€”face a variety of challenges in their
quest for financial security. Some of these challenges are similar to
those faced by previous generations, while others are unique to the
times. If you are a Generation Xer, here are five financial tips to
help you manage your money and plan for your future:
1) Invest in your future.
Okay, you finished college and have a good job, but who knows where
tomorrow’s opportunities may lie? Moreover, ongoing technological
changes in many fields will require continual upgrading of education
and specific work skills. One way to improve your job and career
prospects in the 21st century is to give a high priority to furthering
your education. The more varied and flexible your skills, the more
attractive you will be to prospective employers.
2) Start an emergency/opportunity fund.
The uncertainty surrounding the world of work will quite likely mean
your working life may be punctuated by a series of job and career
changes. If you need to go to school full-time to change career paths,
you may have stretches of time without stable income. Building up an
emergency fund (while fully employed) to cover three to six months’
of “bare bones†living expenses can help you control work-related
transitions. This type of savings fund can also be used for
opportunities such as starting your own business.
3) Save early and continuously for retirement.
If you aren’t aware of it yet, welcome to the reality that saving for
retirement is a responsibility that falls squarely on your shoulders.
Even with 401(k) plans that have employer-matching contributions,
the bulk of the funding will be left up to you through tax-deferred
salary reductions. In addition, the uncertainty surrounding the future
of Social Security raises questions about what kind of retirement
benefits the government may provide 30–40 years from now. While that
may seem like a long way off, the key is to make time your ally.
Remember, what you accumulate during your working years will be the
primary source of your income for your retirement years. And, even if
inflation stays low and averages just 3% annually far into the future,
prices will still double about every 24 years, cutting the purchasing
power of your retirement funds.
4) Let retirement funds accumulate. If you change jobs early and/or often in your working years, consider rolling over your account into an Individual Retirement Account (IRA)
or new company plan. It may be tempting to cash in the account,
especially if you have accumulated only a small amount; however, doing
so would make it immediately taxable, and you may also incur an early
withdrawal tax penalty. The greater concern is that you would also be
cashing in part of your most important ally—time.
5) Use credit cards wisely.
Beginning in college, young adults are targeted by credit card
companies. While credit cards are often a great convenience (it’s
virtually impossible to conduct some transactions such as making
airline ticket reservations without one), they have the potential to
create debt problems. Over-spending on credit can create an illusion of
wealth because payments can be stretched out far into the future.
Paying off the full balance each month (except for emergency
situations) is the best way to control your use of
credit.
Found, Not Lost
Some people have used the term, “the lost generation,†to describe
today’s “twentysomethings†(and those in their early thirties).
However, if you learn some basics about personal finance and apply a
little common sense to managing your financial affairs, you’ll be able
to describe your future in far more satisfactory terms.
Copyright © 2006 Liberty Publishing, Inc. All rights reserved.
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