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Your twenties can be both exciting and stressful. On the other hand, you’re likely growing your social circle, building a career, and taking risks along the way. On the other hand, you might be learning how to navigate office politics and stretch out a small paycheck to cover all of your financial needs. Chances are, you’re asking yourself what you need to do now to prepare yourself financially for the future.
And if you’re a woman, it’s even more important to focus on your long-term goals.
There are many reasons why women need to take an active role in their finances and build wealth. For one, women on average live longer than men and will therefore need more money save for retirement. However, a September 2021 report from the US Bureau of Labor Statistics emphasizes that women working full-time still earn 82% of what men working full-time earn – in other words, women earning 82 cents for every dollar a man earns; it’s even lower for women of color.
It is important for young women to start taking steps to make their money work more for them. I spoke with Jill Gianola and Margaret Price, co-authors of the book “Single women and money: How to live well on your income“ to get their advice on the key financial steps women in their twenties should take.
“Twenties is an exciting time because you are starting your career, but you also have to deal with loans and other debt and find ways to save when your salary is not as big as you are,” says Gianola. think. .
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It often feels like you have too many obligations and financial goals to fulfill at once – especially if you’re struggling to cover all of your expenses. A good way to relieve some of that pressure is to consider benefits provided by your employer.
Health insurance can be expensive if you sign up for a plan yourself – on average, health insurance costs $456 per month for individuals and $1,152 per month for a family. However, you can reduce that cost by signing up for employer-provided health insurance. On average, employees will pay about $105 per month for health insurance when they sign up for it through their employer – and the money comes out automatically from your paycheck, so you’re less likely to miss it.
Another common benefit offered by employers is 401(k) Plan or 403(b). With an employer-sponsored retirement plan, you can contribute a percentage of your pre-tax paycheck to a retirement account and the money is invested in assets such as a day fund. target and mutual fund.
Some employers will automatic Enroll full-time employees in 401(k) plans. But if you’re not sure if you did, you can always double check with human resources. You should also make sure you’re contributing enough of your paycheck to get it Recruiter’s Match. This way, your employer also contributes to your retirement savings, which can allow you to grow your account much faster. If you don’t get a match, you’re essentially leaving free money on the table.
Many companies also offer various reimbursement programs for their employees, including discounts on services like fitness centers, courses, and financial planning. Not all employers offer such benefits, but you don’t have to ask – and if you spot your benefits, it could save you some money each month.
Almost all financial experts would recommend young people use some of their paychecks to get started build an emergency fund, and Price and Gianola agree. An emergency fund gives you an amount of money that you can withdraw to cover unexpected expenses.
While some expenses can end up costing you more than you can cover with your savings, the money you save still allows you to avoid going too deep into extra debt.
It’s a smart idea to keep your emergency fund in one High yield savings account that’s separate from the rest of your checks and savings. A high yield savings account – like Goldman Sachs Marcus Online Savings Account or Ally . Online Savings Account – allows you to earn interest on your balance so you can grow your money a little faster.
There’s a lot of pressure to save and invest your money while also covering all your daily expenses like rent and food. Managing your money can feel exhausting at times. To avoid this fatigue, it’s important that you use your money for something you love.
“One of the main things we cover in our book is understanding your income and expenses and how to prioritize your necessities, but also set aside some money,” says Gianola. for the things that bring you joy.” “Otherwise, it’s like going on a diet and saying you’ll never eat another dessert again – you’ll never stick to it.”
You can start with consider your expenses (use a budgeting app like mint or Personal capital) and identify anything you’re currently spending money on but don’t really use or don’t like – like a subscription you forgot or a gym membership you don’t use. This way, you can maximize the amount of money you can comfortably spend on the items you love.
“One interesting thing we’ve noticed is that many women in their twenties don’t know how to use it credit taxes Price said to cut their spending.
Tax credits reduce the amount you will owe. For example, if you owe $500 in taxes, but you get a $500 tax credit, your tax liability drops to $0. Or, let’s say you owe $500 in taxes but get a $1,000 tax credit – you’ll actually get a $500 tax refund. You can then use that cashback to create a savings account or invest more in a retirement account.
There are different types of tax credits you can claim. Eg, California resident Tenants can claim a tax deduction if they pay rent and earn less than a certain amount. H&R block There is a list of several other tax credits available to young people, such as an education credit if you are a paying student and a credit for charitable contributions. Tax credits can often be claimed while you file your tax return.
There is often some debate around whether you should prioritize pay off debt or invest for the future first, but Gianola recommends doing both at the same time for as much money as you can afford.
“I like the idea of achieving more than one goal at a time,” she says. “The amount you put in a Roth IRA or 401(k) today are the most valuable dollars in your retirement portfolio because they will have the longest growth period. So start saving for retirement as soon as you land a job – even if it’s just $10 or $15 a month. But at the same time have a plan to pay down your debt. “
Price also offers higher interest debt settlement – like Credit card debt – first because the longer you carry this balance, the more interest charges you will have to pay. Getting out of high-interest debt can free up some extra cash to pay off other debt or invest more.
Your twenties can be both exciting and difficult, especially when it comes to balancing financial obligations with the rest of lifestyle needs and wants. But if you just have to focus on a few financial steps that you should take right now, start with building your emergency fund, taking advantage of employer benefits, using credits. taxes are available to you, spend some money on the things you love and make a plan to pay down debt and save for retirement.
Editing notes: The opinions, analysis, evaluation or recommendations expressed in this article are the sole opinions of Select’s editors and have not been reviewed, approved or endorsed by any third party.