Originally Posted February 14, 2006
Jordan E. Goodman author of FAST PROFITS in HARD TIMES
SMART MONEY STRATEGIES FOR EVERY AGE AND SITUATION
Your 20s and 30s—Establishing Your Financial Foundation
Section 1 of 11:
GIVING YOURSELF A FINANCIAL CHECKUP:
How Are You Doing Financially?
While you may not even be aware of it, the Social Security
Administration predicts that 85% of the American population will
retire with virtually no savings.
By applying even a few of the suggestions contained in this free
report or in my book, Everyone’s Money Book, you can avoid
becoming part of that cash-crunched 85%.
Instead, you can become part of the fortunate 15% of the
American population who retire comfortably. It’s even possible that
you could become part of the incredibly elite who retire as
millionaires, despite earning only a moderate income!
This report will help you learn how to micro-manage your funds so
that your money multiplies itself. Each section contains useful tips,
techniques and action strategies you can implement right away.
Read on and reap the financial rewards!
GIVING YOURSELF A FINANCIAL CHECKUP:
How Are You Doing Financially?
The transition from school to the workforce can be both
exhilarating and frustrating. Once you land a job after graduation,
you may feel the thrill of financial independence from your parents
for the first time. Yet your starting salary may be far too low to
purchase your first home or even rent your own apartment.
In addition, you may be loaded with debts accumulated to pay for
your education. As you progress through your 30s, your career
should become more firmly established, your income and assets
should grow, and you should gain total financial independence
from your parents.
While you’re young you can (and should) do plenty to establish good financial habits.
Begin by setting aside a couple of hours to give yourself a financial
checkup, and remember that more detailed information and actual
worksheets are available in my book, Everyone’s Money Book.
As you work through “Giving Yourself a Financial Checkup,” don’t
feel discouraged if you haven’t yet built up much in income or
assets or if your expenses seem out of control.
Establishing your financial independence is expensive. Don’t
expect substantial income until you have several years of job
experience, perhaps by your late 20s or early 30s. Asset
accumulation will follow.
GIVING YOURSELF A FINANCIAL CHECKUP
1. Determine Your Net Worth.
Add up the total value of what you already own, known as assets,
and subtract the amount of debt your owe, known as liabilities. The
remaining sum is your net worth.
2. Create a Record Keeping System.
Set up a filing system separate from the rest of your household
files. Be sure to note where all your important documents are
located and other important details such as account numbers,
names of brokers, insurance agents and other people who know
about your accounts.
3. Define Your Financial Goals.
Set specific financial objectives and put them in writing—listing
dollar amounts and noting exactly when you will need the money—
will motivate you to achieve your goals.
4. Analyze your Cash Flow.
Simply: Where does your money come from and where does it go?
5. Create a Budget that Works.
Note all your income and expenses and use it to take control over
your finances. Even if you still rely on your parents for
financial help, balance your income and expenses without regard to
parental support.
6. Assemble a Long-Term Financial Plan.
Prioritize short-, medium-, and long-term goals. You have most of
your life ahead of you, and the sooner you determine what you
want to accomplish first, the greater the chance you have of
realizing your dreams.
Don’t expect to meet all your goals at once. Saving for a down
payment on a home, for example, may be a higher priority than
buying a car or having a child.
7. Assess Your Risk Tolerance.
Realize that while you may not yet have a great deal of money, you
do have a great deal of time for your investments to grow. At this
age, you have a lifetime to bounce back if a risky investment fails.
In addition, if you can tolerate more risk, your investments will
have a long time to appreciate significantly. Most people in their
20s and 30s are apt to be too conservative with their money.
Instead, you should take more risk in hopes of higher long-term
returns.
8. Use Your Computer to Keep Your Finances in Shape.
Enter your data into a personal finance software program and/or
use the Internet and its many Web sites (like
MoneyAnswers.com!) to educate yourself about finance and
to track your progress toward your financial goals.
*Check Out Section 2 of 11
