Did you recently start college? Have your first job? Or are you leaving home for the first time? If so, this is the perfect time to start thinking about your financial future.
To give you a helping hand, we’ve asked our experts for their advice for young people who are just starting out. The first person we turned to was our Chief Tax Officer, tax instructor, and Enrolled Agent Knox Wimberly. With decades of experience in the financial world, Knox knows his stuff, and he’s happy to share some of his wisdom with you.
Here are his top four pieces of advice for anyone who is just starting out:
- Start saving toward your retirement NOW! Because of compound interest, every dollar you put towards retirement now grows exponentially. The younger you start, the better off you will be.
- If your employer offers a match towards your retirement (most likely in a 401K or a 403B), make sure you contribute at least the amount needed to get the maximum match possible. Not doing so is just throwing away money. In many cases, you will also qualify for a savers credit from the IRS on your taxes for contributing to your retirement account. That’s free money that will save you on your taxes!
- Make a budget and stick to it. As a general rule of thumb, you want to try to live on about 50% of your income. Put 20% towards retirement and 10% towards liquid savings (I recommend a separate savings account for this). This leaves you with 20% for discretionary spending.
- Consider a High Deductible Health Plan and a Health Savings Account. If you are relatively healthy, this will help you to save on premiums and put money aside in a tax-advantaged way for a future rainy day with your health.
We hope these tips will help you start planning for your future. And remember, when tax season comes along, the accountants at Happy Tax have your back. Our team can work with you to get your taxes filed accurately and on-time. Plus, there’s no need for you to come to a tax office, so while we’re taking care of your taxes, you can keep working towards a brighter tomorrow.