If you’re young and just starting a job, what’s the best approach to get you started on the road to financial security? Work, however, is not the only factor to consider. You must also turn your money into wealth in order to gain financial security that will not vanish if you lose your job.
So how can you turn your paychecks into savings, investments, and other types of wealth that can help you better weather life’s ups and downs and, ideally, give you more flexibility when it comes to expenses while allowing you to achieve financial independence?
1. Live within your means
Maybe that advice isn’t welcome in a society where instant gratification is the norm, and lenders will do anything to lure you into debt so you can live the life you want, even if you don’t. can’t afford it. However, you can never achieve adequate financial stability if you spend every penny you earn (or more).
Put your savings on autopilot, i.e. sign up for a retirement savings plan, maybe your employer offers one, which automatically deducts money from your salary and allocates it to retirement. Previously, do you have the option of spending it, putting money in an investment or savings account?
2. Don’t complicate things
Read financial news or listen to investment experts. You will feel that the best way to be a successful investor is to invest your loan money in a bewildering array of options, the more complex and enigmatic the better.
But do you need to invest in expensive fixed index annuities that promise to give you the benefits of rising stock prices without the downsides of falling stock prices or a fancy ETF that aims to increase returns by entering and leaving different market segments? In any case, the more niche investments you make and the more market segments you cover, the more you risk “diverging” your portfolio rather than diversifying it. You can check Ikano in this regard.
3. Continue on your current path
It is essential to take the path of financial security, but it is even more essential to stick to it. There will inevitably be times in your life when you are tempted to give up. If you lose your job or go through a period of unexpected expenses, you may feel compelled to abandon your savings plan or even dip into the funds you have saved.
Additionally, excessive market volatility or a stock market crash may cause you to wonder whether it is better to sell your stocks and replace them with less volatile investments.
4. Consider taking reasonable risks
On the road to lifelong financial security (especially while you’re young, as taking on additional obligations can be more difficult), which can sometimes mean taking risks.
These risks must be considered and mistakes must be learned for it to be a wise long-term option. The platform talks about the following assessed risks with regard to financial decisions:
- Change your location to a city with more job prospects.
- Back to school for more training.
- Accept a new job at a different company that pays less but offers better opportunities for advancement.
- Start your own business or work for a small startup.
- Invest in stocks with a high risk/reward ratio.
5. Borrow money, but only to invest it.
Only two situations in which this financial expert considers taking out a loan and paying interest are acceptable: when it is necessary to exist and when you will earn more money with the financed object than with the money you have. paid to invest it.
Borrowing money (lån penge) only to invest, whether in stocks, bonds or to start a business, and not to improve your lifestyle (only leads to debt). Borrowed funds should only be used for investing when the rewards outweigh the cost of lending.
6. Make the most of cash “gifts”
Because there are few gifts in life, it is better to take advantage of them when they come. The platform stresses the need to use financial “gifts”, such as money provided by a company’s pension scheme, and to look for (legal) ways to circumvent tax rules (such as contributing to an individual retirement account or investing in stocks).
Conclusion: Start by saving at least 10% of your annual salary and, as your income increases, increase this amount by one percentage point each year until you reach 15%. If you stick with this approach for the rest of your working life, you could end up with a healthy retirement fund.
Story by Sudip Mazumdar