Plan for the Future: Financial Tips for Young Professionals

NEW YORK, November 23, 2021 (Newswire.com) - Northwestern Mutual: Starting out in a new profession is an exciting time. And probably one of the last things most young adults are thinking about when they get their first paycheck is long-term future planning. But the reality is, there's no better time to make plans for the future than when someone is just starting out. 

With that in mind, here are four tips for young professionals to get ahead of the game financially. 

Save Early and Often 

Many young professionals fall into a paycheck to paycheck lifestyle simply because there's not enough money to go around. But creating the habit of saving, even if it's only a few dollars a month, will go a long way in helping to develop healthy financial habits in the future. And automating savings, if possible, can be a good way to focus on a couple key savings goals.  

First, set up an emergency fund. Start working to get a few weeks and then months' worth of expenses saved. Just like it sounds, this is money for unexpected big expenses like a medical bill or big car repair. Experts recommend eventually getting about six months' worth of expenses saved in an emergency fund. 

Next, start saving for retirement. Thanks to compound interest, even a little money saved now can grow to a significant amount in the future. It's also a good idea to take advantage of a retirement plan through work if one is offered. If not, young professionals can also consider opening an IRA, which offers tax advantages for retirement savings. 

Be Careful of Lifestyle Creep 

When beginning a career, it's typical to make modest money compared to what earnings may look like even a few years down the line. One of the most common traps people fall into as they begin to earn more is lifestyle creep. This is simply the process of spending more as one earns more.  

With every raise, it's okay to spend some immediately (it's a reward now for a job well done). But a hack to consider is upping goal contributions with every raise. 

Consider Insurance 

The reality is that bad things happen, and insurance is there to make sure that if it does, there's a financial safety net in place.  

There's car and renter's insurance. But there are other important types of insurance that to consider. At the beginning of a career, life insurance may seem like an expense that can wait. But over time, many people will have a need for a death benefit to protect their loved ones. Whole life insurance features not only a death benefit, but the policy will build cash value over time — another way to save for the future.  

The Bottom Line 

Managing finances might not be at the top of everyone's list of priorities while building a career. But planning early can make goals more attainable over time. Consider these financial tips to start planning for the future as soon as possible. 

Source: Northwestern Mutual