When you’re half-way through your twenties, it’s likely you’re still in the midst of figuring out all aspects of your life, including your financial wellbeing. 25 is a prime time to reevaluate your financial goals. Now that you’re closer to 30, there’s no better time to consider the financial goals that you should be setting for yourself as you enter a new phase of life. Ready to set yourself up for long-term success? Here are the 4 key goals you should have on your list.
Contribute to Your 401(k)
When you’re 25, retirement feels like a lifetime away. However, you should always think long-term when it comes to your financial security. In order to create a bulletproof retirement savings plan, you’ve got to get serious about your 401(k).
Not quite sure what that is exactly? Here’s your crash course — a 401(k) is a retirement savings plan sponsored by your employer that allows you to invest a piece of your paycheck before taxes are taken out. So if you’ve been putting off contributing to it, now’s the time to stop procrastinating! While the amount you contribute to your 401(k) is entirely dependent on your financial situation, most people aim to contribute at least enough to qualify for all the matching and profit sharing plans that their employer offers. This “free” money will help you create a solid retirement safety net.
Pro tip: you’ll want to start investing in your 401(k) as early as possible because of the immense benefits the compounding interest in the plan the account will provide. Compounding interest occurs when interest is earned on the interest you have already accrued. That means if you start saving at a young age, you will see BIG results once you reach retirement age.
Boost Your Credit Score
Improving your credit score is a fantastic goal for your financial health, but it’s not a quick task. In fact, when it comes to your credit score, some “quick-fixes” have been known to backfire. For those of you who have been hiding from your credit score, take a second to remember it’s significance when it comes to your life goals. Your credit score indicates how likely you are to repay a debt, which banks and lenders can use to decide if they’ll approve you for a credit card or loan.
One of the best ways to boost your credit score is to create a long-term plan outlining how you can become more responsible with your finances over time. This plan will include different steps depending on the person, but you should start by getting friendly with your credit score: understanding where you stand and what it means. Just keep in mind that while improving your score can be a slow process, it is worth it in the long run. Whether you’re repairing your credit history, setting up consistent payment reminders, or paying off debt, boosting your credit score will have immense long-term benefits!
Pay Off Your Credit Card Debt in Full
Remember how compound interest was earning you more money for your 401(k)? Well, here’s where compound interest can actually work against you. In the same way, you can build more income earning interest, you can also build debt in owning interest — in particular for your credit card. It doesn’t matter if it’s “good debt” or “bad debt”, at some point all debts must eventually be paid. Debt demands regular and consistent payments, reduces your disposable income, and can limit financial freedom. Paying off credit card debt is no easy task, but it should definitely be at the top of your priority list when think about maintaining good financial standing. This means going beyond your regular, timely payments. When you have the financial flexibility to allocate more money to pay off your credit card debt, do it! The faster you pay off your credit card debt in full, the more likely it is that your credit score will improve, which will put you in a better financial position down the line.
Refinance Your Student Loans
If the struggle is real with your monthly student loan payment, one option you might consider is refinancing your student loans. Refinancing your student loans can simplify the process by consolidating your student loans into one monthly, low-interest payment. The lower the interest rate on the loan, the more capable you’ll be of saving money and paying off your student loans in a timely manner. If rates are going up, you might consider refinancing your student loans at a fixed interest rate. This way you’ll save yourself from the unexpectedness of rising benchmark rates and other variable costs.
Bonus tip: Now that you have all of your goals outlined there’s one last thing you should always try to keep in mind — saving is an integral part of living your best financial life. It’s easy to get caught up in the now, but it’s important to keep your eye on the prize and always think long-term. Try automating some of your accounts so you don’t have to worry about missed payments or contributions. While it might not give you immediate satisfaction, your future-self will thank you for your financial prowess.