For many young adults, making sense of money – from day-to-day management to thinking long term – can create some anxiety. Here are some places to focus when first learning how to manage your money.
- Befriend a budget - Straightforward as this may sound, many don’t take the time to look at their personal financial landscape and assess where their money is going. A good place to start is your more immediate concerns, whether they be current cash flow, debt or risk management.
- Start a “rainy day fund” - From car trouble to unplanned home repairs, myriad emergencies can – and invariably do – present themselves. Having good cash flow to better plan for the unexpected is a critical component of your overall financial plan. A good goal is to have at least six months’ salary available to handle such matters.
- Manage risk - A well-designed risk-management program can help protect you from the unexpected without burdening you with payments you can’t afford. In order to be adequately insured, you should consider five major areas of protection: medical, disability income, property and casualty, liability and life insurance.
- Start investing sooner than later - Developing a comprehensive investment plan tailored to your long-term goals gives you the ability to make informed financial decisions, reallocate assets as necessary, and stay on track to achieve your goals. Before you select individual investments for your portfolio, determine the most appropriate balance of asset classes that conform with your risk tolerance, timeframe and investment objectives. This process can help you balance investments that have differing levels of risk and potential reward.
From your day-to-day finances to your long-term investment objectives, there’s an enormous amount to consider when it comes to managing your money… but it’s a subject well worth your time. Working with an experienced financial advisor can provide you with a customized portfolio and discipline that can better position you to reach your short- and long-term goals.
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