It is never too early to start planning for your future. In fact, the earlier you put plans into place the better prepared you will be when it comes to your later years and you start to think about retirement. But what are the best ways to get financially ready for your future and what are the best steps to take to secure your financial future?

Savings

No matter how little you can afford to save, it is always a good idea to have some sort of savings accounts for the future. You’ll definitely want to have an emergency fund set aside of 3-6 months of expenses. On top of that, you’ll also want a general savings account, whether for ‘just because’ or for a specific purpose (i.e. saving for a new car, down payment or grad school tuition). Saving money to build a nest egg for the future doesn’t mean you need to squirrel away large chunks of your income. Putting aside an amount you can comfortably afford each month is the easiest way to build your savings. Even if it’s something small like $25/month, every little bit helps! Over the years, your pot will build and by saving in an account with a high-interest rate (i.e. a credit union or an online bank), you can see your money grow a little bit more over time.

Retirement

Planning for your future means having a retirement plan in place. Whether this is done directly through your employer, or you pay into a retirement fund yourself, saving for retirement is important. Start by making a rough estimate of how much you will need to live off in your retirement years. ($2M isn’t a bad estimate). Base this on what you spend now for a guide and then later in life, make a more exact figure to work towards to help you cover all your outgoings and living costs. Here in the US, retirement saving can be done in a tax preferred account, so take advantage of a 401K through work or an IRA personally to avoid paying taxes on retirement money.

Credit Rating

Building and maintaining a good credit rating during your lifetime will pay off in later years when it comes to making big purchases such as taking out a mortgage or loans or starting new businesses etc.

Having certain types of debt are good to prove you can manage what you owe (i.e. a mortgage on a house). However, taking on too much credit and struggling with your repayments can have a detrimental effect in the long term and damage your score. This will impact on many areas of your life and you may find you will struggle with things such as rental agreements with a poor credit rating.

Investments

Consider investing your money or building a portfolio that will work for you in later years. Whether you choose to start small and low risk by investing in an index fund or you take a bit more of a risk and put your money into individual stocks. Choose an investment type that works for you and will help you realise your financial goals for the future and set yourself up for an additional income stream that comes in regular or a big pay off for years down the line. One important thing – it’s recommend you reinvest your dividends. If you don’t need the money now, keep putting that extra growth back to work!

Like with most things, investing comes with some element of risk and you may end up losing some or all of your money should the worst happen. Make sure to do your homework before investing to make sure you have found an option that works for you and you know the benefits and risks before you part with any money. I personally am a big fan of index funds, lower risk, lower fees and typically a steady return.

These are the 4 basic building blocks of saving up for your future. Doing so now, even in marginal increments will pay off in the long run!

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