Some people spend their 20s partying, but others want to use this time to develop their careers and secure their future. This is the time of your life where you can still experiment with your career and choice without affecting your future too much. Since most people don’t have any major obligations at this age, it is a good time to develop good financial practices.
For those that want to secure their future and retirement funds, here are the things you should do:
Manage investments yourself
One thing that every working individual should consider is investing. Now, there are a variety of ways that this can be done. Before anything, you will usually be asked to do an investment risk profile. This determines how conservative or how open you are to making high-risk investments. You will be asked this because it will determine what is the best type of investment for you. Some have a high r risk of losses but also high returns. On the other hand, conservative options would generally always have returns, albeit minimal.
Now, you have the option to decide whether you want to manage your investments yourself or through a manager or advisor. Investments handled by banks are done by their fund manager. With stocks, some people hire financial advisors to manage it for them. Basically, they decide where and when to invest, so you don’t have to.
This may seem like a convenient idea but actually, it may not be the best choice. Advisors often charge a hefty fee, and you are not sure about their skills. You may end up hiring a substandard advisor and lose money. Experts say that if your finances are not that complex or involve large amounts of money, then it is better to simply do it yourself. It helps you better understand where your money is going, and you get to save on additional fees.
Find alternative lenders
Many times, you have to spend money on your personal development in order to improve your financial status. However, not everyone can afford to do this, which is why loans exist. What makes this more difficult are criteria that can be discriminatory in nature. Reports even found that certain races have higher rejection rates, so it can be difficult to secure a loan.
What you can do is find other possible lenders aside from banks. Credit unions are one option, and it can actually be better because they have lower interest rates and fees. They are specifically designed to help those in the community. The terms are also more flexible and are open to negotiation.
You can also try private lenders. Unlike banks, they often do not require high credit scores and are less strict about their approval. There are also specific lenders for certain types of loans. For instance, private lenders for real estate are for those that want to construct, renovate, or rehabilitate a home.
Avoid VUL
Have you ever had an agent approach you and offer a life insurance plan that also includes an investment? Those are known as variable universal life insurance or VUL. Under these plans, you are told that you have to subscribe to a long-term insurance plan in exchange for health and death benefits. The money you pay is supposedly invested in different accounts and after a certain amount of time, the money is said to grow. However, that is only good on paper.
What people don’t realize is that this plan is significantly more expensive, especially with all the premiums added to it. If you cash in a large amount before its time, then you also risk losing your policy. In addition to the price, the money you initially invested is not the actual amount that is invested. A portion goes to the benefits that come with it, and an even larger portion goes to management fees, which can also increase over time.
As purely an investment, VUL is not ideal, but it can be useful to have if you have spare money. You are better off with term insurance because you can easily end it without any additional losses. A better investment would be to put them in individual index funds.
Don’t stay in a job too long
Back in the day, people stayed for decades in a single job out of loyalty or fear of prejudice. While this can be a good way to get promoted, this can also be harmful to your career. For one, potential employers might think that you are not driven enough to branch out. Another is that it does not reflect any new experiences or skills. In most cases, switching jobs will allow you to get a higher salary.
This does not necessarily mean that you should be job-hopping every year. It is best to stay in a single job for around two to five years to avoid it. Unless you were promoted to a significantly higher position, there is little benefit to staying in a company for so long.
