iStock Henk Badenhorst

As a young adult, it’s important to learn the best strategies and habits to manage your finances, both now and in the future. The earlier you understand and utilize these practices, the better. But where should you begin?

Like any journey, the road to financial success needs a destination. The first step is to define financial goals that support your personal ambitions and life objectives. These decisions will form the foundation of your broader financial plans. 

Financial Planning And SMART Goals

Financial planning is important, regardless of age, and your life and wealth objectives are the core element of these plans. Be honest and aspirational when defining your goals. Make sure that the goals you define are SMART:

•    Specific
•    Measurable
•    Achievable
•    Rewarding
•    Trackable

Tip: Don’t say something vague like “I want to travel the world”. Research the cost of airfares, accommodations, and additional expenses to calculate an actual dollar amount. Then develop a realistic timeframe in which to save, and decide how you’ll track progress to reach your goal amount.

Setting Financial Goals

Your financial goals should cover both current and future needs, and should be flexible enough to cope with unexpected life events.

Short Term Goals (within 0-2 years)

One of the most important short term goals is establishing an emergency fund. This is a separate cash account containing 3-6 months of expenses. Your emergency fund provides peace of mind in the event of unexpected job changes or other major expenses, and helps to avoid credit card and other debt.

Tip: Online banks typically offer easy access and better interest rates than brick and mortar banks.

Intermediate Goals (within 2-10 years)

Intermediate goals include larger expenses that will take longer to attain. Examples include saving a down payment on a house, buying a new car, or completing your Masters or Ph.D.

Tip: Aim for a down payment of at least 20% of a home’s value, as this amount often removes the need for private mortgage insurance. Additionally, many lenders require you to limit your total debt per month (including your mortgage) within a set percentage range.

Long Term Goals (10 years and beyond)

Even though it may seem a long way off, start planning for retirement as soon as possible. For Millennials, the reality is that your retirement income is unlikely to include Social Security or a pension income. This means that Millennials need to save more of their income than any prior generation. The goal is likely 10-20% of your income.

Tip: If your employer offers a retirement match, take full advantage of this opportunity by contributing the maximum amount to your retirement fund.

Make Your Financial Plans Work For You

Once you’ve set SMART financial goals, focus on making them a reality. As a Millennial, you face unique opportunities and challenges, but the fundamentals remain the same: control your cash flow, manage your debt, and avoid lifestyle creep.

Tip: Make use of available technology to help you balance your budget, earn rewards for yourself, and manage other financial tasks.

SageVest Wealth Management is committed to connecting our clients and their families with their wealth. We offer ‘lunch-and-learn’ opportunities for Millennials that cover a broad range of financial topics including budgeting, the importance of credit, investment basics, insurance and estate planning necessities.

We also offer much broader financial educational resources for kids ages 3-18 via our website, SageVest Kids.com. The site offers a unique blend of developmental milestones, alongside financially-focused activities and chores, to help parents instill financial literacy from an early age.

If your family includes an older teen or young adult, we encourage you to contact us for more information about our family-oriented approach to financial planning, and other services that we offer.

Prepared by SageVest Wealth Management. Copyright 2016.

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