Studies show that Generation Z (also lovingly referred to as Zoomers) are more financially savvy than we expect them to be. Those born in 1997 and forward actually have some financial know-how, perhaps even more so than the generation directly before them, which are millennials. But at the same time, there are also plenty of things they get wrong about finances. If you are a Zoomer or in your 20s, it’s never too early to start planning and securing your financial future. Your 60s or retirement season may feel like a world away, but one blink and you may find yourself scrambling to build a future in a short amount of time.
If you want to be smart and strategic about your financial resources so that you can have a secure and fun future in your twilight years, here are some simple tips to get you started.
Have a keen understanding of how 401k works
Here is the 411 on the 401k: It is based on section 401k of the United States’ IRS tax code. It is the process of investing a certain amount of money into an account, with these funds being earmarked for the investor’s retirement without having to pay taxes on whatever the gains will be until the investor reaches retirement age. There is also another option, which is paying for taxes while you invest in your 401k and then enjoying a lower tax rate later on when you find yourself having a higher salary. If you want to plan for your future as early as now, then invest in your 401k. For example, the employees of corporate giant Lockheed Martin enjoy what is known as the Lockheed pension, where the employees enjoy the privilege of knowing that their company is working hand in hand with them to build their futures.
Pay off your debt
Student loan cancellation is one of the most pressing issues of our day, and full-scale pardon for the loans may not happen any time soon. But if you truly want to plan for your retirement, getting rid of all types of debts will be key. Here are some ways you can pay off your debts—college loans and otherwise:
- Prioritize debts with high interests. There is no incentive in saving extra funds for your retirements, all while paying off thousands of dollars in credit card debt, especially those that yield higher interests.
- Financial analysts may often advise people to pay off their student loans first before saving up, but this can change on a case-to-case basis. Consider consulting with a financial pro before making these types of decisions.
- Consider your options, such as refinancing your student loans. It’s basically the process of consolidating your loans into a single entity by taking out a new loan to pay off the original student loan. It’s one of the best ways to secure lower interest rates, especially since as time goes on, you might find yourself on a more stable financial footing than when you first took out the student loan.
Always have cash on hand
One of the things you need to learn before opening retirement accounts is that you cannot withdraw your funds without paying a stiff penalty. In many cases, you might have the privilege of borrowing from your 401k, but you still have to pay it back. Make sure you have an emergency fund outside of these investments and retirement accounts so that you’re always ready for a rainy day and so that you have somewhere to draw funds from when you face unexpected expenses. The rule of thumb is having an emergency fund that’s three to six months’ worth of your current living expenses.
Automate your savings
Every time you get your paycheck, your priority should be placing a fixed amount into your savings account. Consider automating it or asking for help from your company HR. Being disciplined is so much easier when something happens automatically. Don’t be stingy when deciding on a monthly savings amount, especially if you’re currently single. Make your monthly savings a significant amount.
The Instagram life is too good to be true
Lastly, don’t fall for the lie that you can earn money traveling all over the world or being an Instagram influencer. It may be possible, but these cases are one in a million. Do not look down on a 9 to 5 job, and believe that you have skills you can leverage to earn a stable income. Be resilient, practice delayed gratification, and work hard for the future you want.