Whenever someone presents a roadmap to financial success, the first and most obvious question is “did the person who wrote this list get rich first?” It’s a fair question, and the truth is not everyone can execute on the right plan as well as they should.
The road to financial freedom is sometimes a long and winding one, but it is pretty likely to pass through a few recognizable stops along the way. The main asset a young person has is time, and their plan should take into account the fact their horizon for relying on their wealth rather than their paycheck income is a long one. That said, there are some fundamentals that have to be covered first.
Accountant
Even if a millennial-aged person is only working part time, and only has minimal financial obligations, they should still seek the advice of an accountant. Preferably one with certification as a financial planner. Chief among their initial discussion topics should be taxes, the establishment of as many tax-advantaged retirement vehicles as practical and some kind of structured plan for investing towards milestone expenses like a down payment on a house, marriage and first child followed by set-asides for education. Paying off any high interest loans should be prominent in this plan as well.
Trying to manage all these details alone is a sure-fire recipe for disaster.
Taxes
With their accountants by their sides, millennials should become intimately familiar with their tax situations and how to minimize their expenditures. From a simple standpoint of arithmetic, no expense even remotely compares to taxes in the life of the average American. There is also no single mechanism by which more wealth can be preserved than by the prudent minimalization of tax liability.
True, everyone should pay their fair share, but a taxpayer’s only duty is to follow the rules. Nowhere does it say they should overpay as a matter of habit. Doing so only hurts their chances of achieving the results they’ve worked so hard to obtain.
Escape from Debt
Mounting debt is a one-way ticket to bankruptcy. While some debt can be beneficial, taking on too much debt versus income means you don’t make enough to ever climb out of the interest that accrues.
The answer is for young people to take their financial future into their own hands. Identify all of their highest interest loans and credit cards. Let’s say you graduated college with a master’s degree in engineering. This degree most likely put you in substantial debt and you may have even had to take private student loans to pay for it. If those loans have high interest attached to them, look into refinancing those loans to lower the interest rate. Consider speeding up the payoff of the loan by paying a little extra on each month’s installment payment.
For some, other steps will get them to the same destination. The key is to remember that flipping on the auto-pilot switch and coasting along paycheck to paycheck is going to provide just enough income to keep you fed and clothed until you are no longer useful, by which time you will be politely handed your hat. To reach the goal of financial freedom, you will need to actively manage your affairs for your own benefit.
*Collaborative Post*
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