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5 Critical Financial Planning Tips for 20-Somethings<br><br>

You’re never too young to start planning for your retirement. In fact, most financial planners bemoan the fact that clients often wait too long to start saving for their golden years.


This procrastination can result in more aggressive (risky in other words) investment strategies that can leave older investors more vulnerable to short-term fluctuations in the market that diminish their retirement savings.


But starting early and sticking to a sensible, long-term retirement saving plan not only helps younger workers better prepare for retirement, it sets the foundation for sound economic decision-making throughout their lives.


Here’s an interactive slide show counting down five things 20-somethings can do today to ensure they have the means to retire in the style when the time comes.


Source: RBC
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1. Live Below Your Means<br><br>

The key is to live on less than you earn. Leave yourself some wiggle room so you don't spend up to or above your limit. On your next pay check, try to save more and spend less. Find an experienced financial planner who can help you visualize and plan for your long-term retirement goals and try to save between 3% to 10% of your monthly salary to invest in that pursuit.
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2. Fatten Up Your Piggy Bank<br><br>

It’s an old song but it’s still a hit. Save, save, save. Even if it’s only a few bucks a month. When younger workers are first starting out and trying to establish a career, they’re often tied down by student loans or major purchases such as a car, their first home or – more often than not – lingering credit card debt.


The trick is to incorporate savings into your budget before you become accustomed to spending it every month.
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3. “D” Is For Discipline, Not Debt<br><br>

The sooner any client learns this fundamental philosophy, the better. If they have debt – whatever the source – help them organize it in order of interest rates and begin paying down the outstanding balances with the highest interest rates first. It might even be worthwhile to consider consolidating all loans under one umbrella – particularly if a lower overall interest rate can be negotiated.


The key is to get young clients to clear out as much debt as possible as fast as possible so more of their monthly income can be put to use in long-term investments that will pay huge dividends 30 or 40 years down the road.
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4. Emergency Funds Are For Emergencies Only<br><br>

As a general rule of thumb, an emergency fund should be about three times your monthly expenses if you’re single and six times your monthly expenses if you are married or have children.


Stash away whatever rainy day funds you can in the best possible interest rate accounts you can find and leave it alone. This is the parachute you may or may not need and will prevent you from taking on more debt and interrupting your established retirement savings plan when things go awry.
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5. Continually Analyze All Your Spending Habits and Adjust as Necessary<br><br>

Let’s say, on average, you spend $10 a day on lunch. That’s $50 a week and $2,600 a year. If you earn $30,000 a year, you could potentially save up to 9% of your annual salary by brown-bagging your lunch. Apply the same scrutiny to coffee drinks, cocktails after work, etc.


By reigning in these non-essential expenses, you’ll have more money to throw into mutual funds, IRAs and other income-generating investments that multiply substantially over the course of three or four decades.
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