Four Wealth Building Tips for Twenty-Somethings

Not Your Father’s Money Tips

Hello Everyone!

Once again, I will dig into my mailbag to discuss a viewer’s question

Jean from Rocky Top asks “What are the best financial moves a 20 something year old can make today?”

Thanks Jean- Great question.

I’ve been lucky enough to have several clients refer their adult children to me this year. I’ve seen several recurring themes as we discuss their financial future.

Here are my top 4 financial planning recommendations for young adults.

Money for the “Oh No” Moment

• Build an Emergency Fund– In today’s world it’s easy to take out your phone and pay for a random meal or set up a subscription for a streaming service. Usually, those charges go on a credit card and sometimes you build a balance that isn’t paid off. Then your car needs a new A/C and your card gets maxed out. All the while your paying 17-25% interest on the balance. Instead, try to create a subscription to yourself—-set up an automatic withdrawal to fund a savings account. Your goal should be to accumulate at least 3 months of living expenses in the account. So, if your car needs service, you don’t have to tap your credit and hurt your credit score.

Can’t Beat Free Money!

• Maximize Your 401k Match – I have several clients who didn’t know how much they were contributing to their company retirement plan. And some weren’t taking advantage of the Company match on their contributions. This is like seeing $20 dollar bills on the sidewalk and not picking them up! It’s a really big missed opportunity. Many companies will add a dollar to your retirement account for every dollar that you contribute up to some limit. Take advantage of this 100% return on your contribution!

The Swiss Army Knife

• Open a Roth IRA– The Roth IRA is like a Swiss army knife. It’s got a lot of great features that can be used in many ways. If you are in your 20’s, you probably are in the lower end of your lifetime salary levels. So, you’re likely in a low tax bracket which favors this type of account. The Roth IRA allows you to save tax-free, when rules and regulations are followed, and has special benefits for those who want to save for their first home or put a child through college.

Health Living Can Pay!

• Investigate a Health Savings Account– This is a great way to add to your retirement savings and reduce taxes. If you’re healthy, you may want to consider a high deductible health insurance plan at work. Then you are eligible to contribute to a health savings account (HSA) which reduces your taxable income and withdrawals are tax free if used for health care. Sometimes there is an extra bonus. Your employer may add to your account as an incentive. Check it out.

That’s my top 4 wealth building opportunities for 20 somethings. If you have questions about your unique situation, please give me a call and Let’s Make a Plan!

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The views and opinions expressed herein are those of the author(s) noted and may not represent the views of The Lincoln Investment Companies.  The material presented is provided for informational purposes only.