.: How Life Stages Affect Investing
Category:Home / Finance / Personal Finance
Young people need to start thinking about investment options as soon as they graduate from high school or college and enter the working world. After all, one never knows when an emergency is going to happen, and you need to have some liquid assets at your disposal. Sadly, the first thing that comes to the mind of most people is a traditional savings account, and though this may work in the beginning, it should not be used for very long as the interest rates on savings accounts now average at most banks less than 3% per year. This may sound like a good deal when you first start working and don’t have more than a few hundred dollars a month to save, but you need to look to the future and the changes that may take place in your life.
As a new college graduate, probably the first life change that is going to come your way is buying your own car, or if you’ve been one of the lucky ones to already have one, a newer car. This, of course, takes money unless you walk into a great deal where you need no down payment, just your old car to trade. You will probably also want your own place, and if you’re fortunate enough to have parents who are not adverse to still having you live at home, think about staying there until you can buy your own home, even if it’s only a townhouse or mobile home to start. These, also, cost money, so you need to think bigger than that 3% a year savings account. The best way to work your way up from that savings account is to use it until you have enough money in it to convert it to either a CD or a money market account. Keep in mind that the CD requires a wait until it matures, usually a minimum of 3-5 years for the best rates, so unless you are willing to wait that long, you may want to consider a money market account instead. Many banks and credit unions offer these with as little as a $1,000 investment, and you can add to it without opening a new account. Additionally, you are allowed to make up to three withdrawals a month without facing a penalty.
As a new working adult, you also need to plan for retirement, and the best way to do that is through a company sponsored 401K Plan or if that isn’t available, an IRA. Naturally, a 401K Plan is going to be the better investment because your company is going to match your contributions in some way – it’s generally either 25%, 50%, or 100% matching up to 6% of your pay. These plans also allow you to save on a before tax basis, which means you pay less taxes on your earnings. With an IRA, though there are no employer matching contributions, you are allowed to claim up to $4,000 currently as an IRA contribution if you’re under the age of 50, and $4,500 for those over the age of 50. Remember, both of these are long-term investments, intended for your retirement as a supplement to Social Security and either a supplement or replacement for your pension. The good thing about a 401K Plan instead of a pension plan is that it can be taken with you when you leave the company and rolled over into another company’s 401K Plan or into an IRA. With a traditional pension plan, if you leave the company before you are vested, you lose your pension totally.
Once you marry, these investments become more important, and you will see the true benefit of everything that you have chosen. Remember, start with the savings account, upgrade to the CD or money market, and always contribute to a 401K or IRA Plan. If you start when you are young, when you retire, you will be able to enjoy the things that you have worked so hard to achieve, including sending your children to college, and maybe even helping the grandchildren through some rough spots that their parents can’t. Don’t look at savings as cutting into your spending money, look at it as an investment in your future and that of the family you will eventually have
Article keywords: Life Stages, Aging, Young, Investing, Financial Planning, Investing for the future
Article Source: http://www.articles32.com
Richard Callaby is a Independent Computer Consultant, Writer, Author, Speaker and Instructor. More articles from this author and many other authors on personal finance can be reached at econtentking/finance.
.: New Personal Finance Articles
1). How To Get Out Of Personal Debt
Personal debts can see your hard earned money vanishing without you even realizing it. What are the steps you can take to control this?
2). Guide To Payment Protection Insurance
When you take out a loan, whether it be a personal loan or secured loan, you will be repaying it over a fixed term which can range from a couple of months to several years. But what happens if you cannot afford to repay part of your loan one month? This where payment protection insurance could help you. But in other cases it can only serve to hinder you.
3). Considerations When Trying To Arrange The Best Personal Loan
Arranging a loan between friends or family can raise some warning signals you should be aware of.
4). Guide To Secured Loans
A Secured Loan is one that requires you to use your property as security against the loan. This means in order to take out a Secured Loan you will need to be a house owner, and this includes if you are still paying off a mortgage. It does however mean that you if fail to keep up the repayments on your Secured Loan, you could risk losing your home.
5). What To Look For In Payday Loans
When searching for any type of loan, including payday loans, there are a number of factors to consider. Here we give you an accurate and detailed look at some of the factors to consider when choosing where to submit your application for payday loans.
6). Tips For Obtaining & Repaying Payday Loans
Whether you are considering applying for payday loans or are currently attempting to repay one, the following tips are designed to help you get the fast cash that you need or repay your lender without further delay.
7). Consolidating Student Loans Can Help Reduce Your Debt
Consolidating student loans is a savings option available through lending companies to assist graduating students when they leave college. This is done through one combined loan with an extended payment schedule which results in a smaller monthly payment. Would this benefit you?
.: Top Personal Finance Articles
1). Space-Saving Appliance Saves Homeowners Money
Wall-hung boilers are here to stay in North America.
Used in Europe for more than 35 years, North Americans are increasingly embracing the space-saving appliances for their ability to cut home heating and hot water bills in half.
Many wall-hung boilers, such as the Baxi Luna, are environmentally friendly and so quiet that they can be installed in the bedroom.
2). Forecasting the Future Value of Your 401(k)
If you’ve got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your 401(k) account.
The FV function calculates the future value of an investment given its interest rate,
the number of payments, the payment, the present value of the investment, and,
optionally, the type-of-annuity switch.
3). Why Money Does Not Really Make Your World Go Round
4). The Importance Of Saving Money For The Future
Money in my opinion is not the most important thing in life, but it is nice to know that you have a certain amount of money, saved or invested, which you can use if needed. I actually think that health and happiness are the two most important things in life. Having this pool of money helps to keep me healthy and happy, as it means that I do not have to stress as much about the future.
5). Post-Christmas Financial Difficulties
If you’ve spent more than your budget can cope with, then maybe you’re thinking about credit to help you through January. Many people fear the long, broke month of January. After a lovely Christmas full of joyous smiles January can see a mood swing in the wrong direction. Many of us turn to credit cards to help get through this terrible month. But without knowledge of the financial industry a person without a great income can fall victim to the evil grip of unscrupulous credit companies.
6). Changing You Spending Habits
It is every one dream being a millionaire and retiring with a healthy bank account, but how many people can actually achieve it? So few. This is largely due to lack of discipline in building up their retirement fund and poor spending habits. While building a retirement fund requires time, you can accelerate the process by making incremental but positive changes in your spending habits.
7). Forecasting the Future Value of Your Roth-IRA or Roth-401(k)
Curious about how much money you'll accumulate in your Roth retirement account?
If you’ve got Microsoft Excel (or just about any other popular spreadsheet program) running on your computer, you can use its FV function to forecast the future value of your Roth IRA or Roth 401(k).
The FV function calculates the future value of an investment given its interest rate, the number of payments, the payment, the present value of the investment, and, optionally, the type-of-annuity switch.