Wealth management may seem like something you don't need to worry about until you're older and have amassed a small fortune. But even a small amount of wealth is wealth, and if you want to grow into a large amount of wealth, you need to manage it well. Here are some of the ways that you can do a better job of managing your wealth while you're in your 20s.
Save for Retirement.
Compound interest is basically magic. The earlier you invest a dollar, the more it will be worth when you do eventually retire. If you are not saving for retirement yet, you absolutely need to start in your 20s.
If your employer offers a 401K match program, that is often the best place to park your funds, since your employer will match your contributions (meaning they'll invest even more for you)! If you do not have an employer-sponsored investment plan, look into Roth IRAs. These are independent retirement accounts that you will one day be able to withdraw from, tax-free. How much should you be saving? Most experts suggest saving 15% of your income for retirement, but if you can't manage this quite yet, 10% is a perfectly reasonable starting point.
Plan for Homeownership.
If you live in an area where it is reasonable to buy a home, you should begin saving to do so within the next couple of years. When you own a home, the money you pay into your mortgage becomes equity, and you get that money back when you one day sell the home. On the other hand, when you pay rent every month, you never see a cent of that money returned to you. Find out the cost of an average starter home in your area. (This is highly variable.) Start saving for a down payment. With an FHA mortgage, you can buy a home with a down payment as low as 3.5%.
Buy the Right Insurance.
Insurance protects you from risk. What type of insurance do you need? That depends on your circumstances. If you have a car, you need auto insurance. If you own a home, you need homeowners insurance. And if you rent, you need renter's insurance. In all cases, insurance is protection against financial ruin. Without it, you could have to pay for the damage caused by a car crash or fire yourself, which could set you back years when it comes to building wealth.
You are still young, which means this is the best time to take control of your wealth! For more personalized advice on wealth management, consider meeting with a financial advisor.Share