When asked when they would like to retire, US millennials answered, on average, that their retirement goal is at the age of 60, which is 2 years earlier than the overall average of people surveyed in 16 countries. This goal is achievable, and with the right type of financial planning, it should be fairly easy to reach. In this article, you’ll learn about five tips for millennials to prepare themselves for retirement.
- Maintain the habit of saving 10% of your income each month
The sooner you start saving money, the sooner you can start benefiting from compound interest. The best way to do this is to arrange for a portion of your income to be automatically channeled into a savings account. This portion can be increased on a regular basis, as your income increase. It’s also a good idea to have enough cash in your bank account to cover at least 3 to 6 months of your monthly expenses, just in case of an emergency.
- Pay off student loans
Many millennials have a lot of student debt racked up after going to college. It’s best to pay off this debt as soon as possible, and the best way to do this is by allocating a part of your income towards this aim. The sooner you start, the better of you are likely to be, because the interest on the borrowed amount is compounded over time, which means that your debt will increase until it is paid off.
- Realistic budgeting
A big part of budgeting is keeping track of the money going out of your home. To start, you’ll have a general idea of how much you spend, but keeping receipts, especially from debit and credit card transactions is a good way to understand your monthly expenses. Receipts will also help guard against financial fraud, in case your CC information is stolen.
- Get insurance
Having an insurance plan can address both your short and long-term goals, but there are many plans out there so it’s best to shop around. Two essential insurance packages include life insurance, if you have dependents, and hospitalization insurance, in case you are stricken with a critical illness. Other insurances include car or home insurance, which will help keep your most valuable possessions covered in case of an unfortunate event.
- Establish good credit
By establishing and maintaining good credit, you ensure that you will always have a pool of money to draw from in case you need it. A good credit score depends on several things such as paying off debt on time, keeping a low balance on your credit card, paying your bills on time and generally avoiding short term solutions such as opening new credit cards in order to increase your available credit. Speaking of credit cards, if you run a business and you use a merchant account to accept payments, avoid chargebacks as much as possible. If you rack up too many of them, your merchant account may be subject to a review or audit.
For more information on how to best manage your finances before retirement, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.