Youve just graduated from college, and need to start paying student loans. You and your bride are looking for your first home. You and your young family cant figure out how to save.
The first third of your professional life, around age 22-35, can be a financially stressful time, with so many responsibilities pulling at your meager dollars. Add to that navigating an economy that is still recovering, and it may seem like you cant get ahead.
But financial planners say the early years are a great time to start building a foundation of wealth and security.
Here are some tips from the experts:
Start with a self-analysis
Track where your money is going. Look at your responsibilities and your living situation. Are you living with parents? Paying rent? Tie that in with your goals.
This is a pretty awesome time of life, youve graduated from college and if you are lucky enough to have a job, you should be thinking about paying down your debt and having fun, said Howard Kramer, a certified financial planner with H.A. Kramer and Associates in Plantation. Its important to maintain a balance, no matter how focused you are on building wealth or reducing debt.
Make your own job
Dont have great job prospects? Create your own. People no longer have the security of staying in the same job until they retire, Kramer said.
A tough economy calls for more entrepreneurial endeavors. So you should think about a hobby or something you enjoy that you can cultivate to one day generate a revenue stream, Kramer said. You have to take personal responsibility for your livelihood.
Young people who do land a job today are more likely going to change employers during their career, and unless theyre government workers with a pension, theyre going to have to come up with a retirement plan, said Jack Patterson, a certified financial planner in Coral Gables.
If youre not going to work for someone who gives you a pension, youre going to have to be a good saver and investor, he said.
Examine your debt
Look at the interest rate of your mortgage and student loans. If they are high, pay down the highest first, then move on to the next one. If they are low, dont pay down debt at the expense of saving, Patterson said.
A lot of people retire and say well, the house is paid off but they dont have any savings, Patterson said. You cant just pay off your home, you have to have money put aside, too.
Rent vs. buy
Back in the day, renting was throwing away your money, said Mary Kirtland, a certified financial planner with Kirtland Financial Management in Coral Gables. Now things have changed.
Today, you need a 20 percent down payment to avoid the costs of private mortgage insurance. Plus, in South Florida, there are higher than average costs associated with buying a home, Kirtland said.
For a $300,000 home, windstorm insurance can run $3,500 to $4,500. Then there is the cost of the windstorm deductible, typically 5 percent or $6,000 for our $300,000 homeowner that should be put aside in case of a hurricane. Top that with keeping your home up to code and paying property taxes.
If youre considering buying, is your job stable? If work requires you to relocate, will you be able to recoup the investment you made to buy a home?