After a young person starts receiving a salary, she should sit down and take stock of all outstanding debt by tracking interest rates, monthly payments, and when debt will be paid off. She should consolidate and pay high-interest debt off as quickly as possible. Getting debt-free is the first step to financial freedom.
Young people should also contribute to an employer-sponsored retirement fund. If an employer matches the contribution, the employee should contribute at least the minimum needed to get the maximum match, since this is essentially tax-free income. Young employees should also maximize their contributions to a Roth IRA for future tax benefits.
Individuals should also track monthly bills and save a three-month emergency fund in case of job loss, serious illness, or car repairs. Savings and investments should be withdrawn and deposited directly from the paycheck to reduce the temptation to not save.
Finally, young people overwhelmed by their finances should consult an advisor for help planning financial freedom.
About the author: George Divel is President of Investments and Financial Advisor at Capitol Securities Management, Inc. Securities and advisory services offered through Capitol Securities Management, Inc. Member FINRA & SIPC. A registered Broker/Dealer and Registered Investment Advisor.