SUCCESS AHEAD

arly adulthood is when many lifelong behaviors are developed, making it a critical time for developing smart financial habits. Learning to set goals, save for the future, and stay out of debt when you’re single will make you a more attractive partner and help you start married life on the right foot. Here are four strategies that can help you avoid critical mistakes and get you on the road to financial success.

1. LIVE ON A BUDGET

Many Americans undermine their financial future by living beyond their means and going into debt. One of the best ways to ensure you spend less than you earn is to make a budget and track your expenses. Without one, it’s easy for seemingly insignificant expenses to add up and put you over the limit each month.

To create a simple budget, first look at your most recent credit card statement and bank account summary. Then categorize each item into fixed and variable living expenses and discretionary expenses. Don’t forget to include contributions to savings and retirement accounts in your budget. If you’re spending too much in certain areas, find ways to trim back on your discretionary expenses. Review your expenses regularly to see where your money is going each month so you can improve your spending patterns over time. Simple budgeting tools like Mint.com or Quicken can help you easily track your expenses.

2. DEVELOP A PLAN FOR THE FUTURE

Think of a financial plan as a road map that helps you identify important life goals, turn them into financial objectives, and develop a strategy for achieving them through consistent saving, prudent investing, and careful risk management. While a comfortable retirement is the primary goal of most workers, the purchase of a house, elimination of debt, a dream wedding, and future education expenses are all important life goals that can be made easier with advance planning. If you want advice in achieving your goals, a financial adviser can help you create objectives and break down a financial strategy into actionable steps.

3. SAVE FOR FUTURE GOALS

If you haven’t started saving regularly, it’s time to start. One of the first steps is to build an emergency fund in case of unexpected expenses or the loss of a job.

For longer-term goals, time, consistency, and compound growth are powerful tools that help small contributions turn into large sums later. If your employer offers a retirement plan with matching contributions, you should contribute, at minimum, as much necessary to take advantage of your employer’s free money. Qualified retirement accounts give you a special edge because your savings grow tax-deferred, giving you the full benefit of potential investment gains until you withdraw the money in retirement.

The chart on the next page shows the annual contributions needed to save $1 million by age 65, at 10 percent compound growth per year at three different ages. If $1 million seems like a shocking amount to save for retirement, consider that with future medical advances, you may be spending more time in retirement than you did working.

If you start saving at age 25, you’ll need to sock away less than $2,500 per year; whereas if you wait until 45, the annual amount needed to achieve your goal will balloon to nearly $17,500. Keep in mind this is a very simple illustration that doesn’t include the effects of fees, taxes, and the timing of investment returns, all of which can change the outcome.

If you don’t have a spouse or kids, you may not have given much thought to estate planning, but it’s important to think about where you want your money to go in the event of your death. It’s very simple to choose beneficiaries for your retirement accounts; often, it can be done online. If you own significant assets outside of your retirement accounts, a financial advisor or attorney can help you develop a more comprehensive plan to take care of your loved ones.

4. LEARN HOW TO HAVE IMPORTANT FINANCIAL CONVERSATIONS

Research shows financial disagreements are one of the strongest predictors of divorce, and couples that regularly argue about money may be more likely to split up. Learning how to set boundaries, communicate about money, and negotiate compromises together is one of the best investments you can make in a relationship. Developing the skills to have these money conversations while you’re still single will help give you the skills to confront financial issues before they turn into major problems. While it’s hard to know when to bring up money in a relationship, it’s very important to get on the same page with a future spouse before making the commitment of marriage. Ask yourselves the following questions:

What is money for?

Do we both contribute financially?

Do we live within our means?

What are our financial priorities in life?

Conclusions

As a single person, you have a great deal of freedom and latitude to create a life for yourself. Consider these tips as initial steps to building a better financial future for yourself and your future family. As with all financial strategies, it’s important to revisit these steps as you grow in your career or experience life changes like marriage, the birth of a child, or