Financial Planning for the 20s and
30s
Young adults in their twenties and early
thirties, so-called "Generation Xers," face a variety of challenges in
their quest for financial security. Some of these challenges are similar
to those faced by previous generations, while others are unique to the
times. If you are a Generation Xer, here are some financial tips to help
you manage your money and plan for your future.
Invest in Your Future
Okay, you finished college and have
a good job, but who knows where tomorrow's opportunities may lie? Moreover,
ongoing technological changes in many fields will require continuous upgrading
of education and specific work skills. One way to improve your job and
career prospects in the 21st century is to give a high priority to furthering
your education. The more varied and flexible your skills, the more attractive
you will be to prospective employers.
Start an Emergency Fund
The uncertainty surrounding the world
of work (witness the recent downsizing that swept through corporate Malaysia)
will quite likely mean your working life may be punctuated by a series
of job and career changes. If you need to go to school full-time to change
career paths, you may have stretches of time without stable income. Building
up an emergency fund (while fully employed) to cover three to six months
of "bare bones" living expenses can help you control work-related transitions.
This type of savings fund can also be used for opportunities such as starting
your own business.
Save Early and Continuously for
Retirement
If you aren't aware of it yet, welcome
to the reality that saving for retirement is a responsibility that falls
squarely on your shoulders. Even with EPF, it will not be enough for your
retirement and the bulk of the funding will be left up to you.
While retirement may seem like a
long way off, the key is to make time your ally. Remember, what you accumulate
during your working years will be the primary source of your income for
your retirement years. And, even if inflation stays low and averages just
3 percent annually far into the future, prices will still double about
every 24 years, cutting the purchasing power of your retirement funds.
Let Retirement Funds Accumulate
It may be tempting to cash in the
retirement account, especially if you have accumulated only a small amount.
However, the greater concern is that you would also be cashing in part
of your most important ally – time.
Use Credit Cards Wisely
Beginning in college, young adults
are targeted by credit card companies. While credit cards are often a great
convenience (it's virtually impossible to conduct some transactions such
as airline ticket reservations without one), they have the potential to
create debt problems. Because payments can be stretched out far into the
future, over-spending on credit can create an illusion of wealth. Paying
off the full balance each month (except for emergency situations) is the
best way to control your use of credit. |
