Reaching financial milestones, such as buying your first home or saving for retirement, can often seem like a daunting task.
A study from WSFS Bank of 2,005 Americans between ages 18-40 found that 58% of Millennials and Gen Z consumers are optimistic that they’ll achieve their financial goals one day, but many still felt some common financial milestones were out of reach.
Balancing your short-term financial needs with your long-term goals can seem overwhelming, but these tips can help you budget and save to reach the finish line in your financial journey.
Purchasing a Car
Whether it’s your first car or you’re just looking to upgrade, it’s important to take a close look at your needs and develop a budget you can stick to. Paying for a new or used car in cash isn’t feasible for most, so ensure you look into your financing options, as you may be able to find a better rate from your bank than from the car dealer.
Evaluate the different vehicle options that meet your needs, shop around for the best price, and avoid the allure of all the fancy add-ons when it comes time to purchase if your budget doesn’t have room.
Keep in mind that supply chain issues during the pandemic have caused a shortage of available vehicles for many dealerships, so it’s more important than ever to have a plan in place to get the car you want when it becomes available.
Buying a Home
Much like the car market, the housing market has been red hot since the pandemic began, and its lack of inventory makes it paramount that you have your ducks in a row.
Before you start your search for your dream home, try to reduce as much of your debt as possible and ensure you’ve built a strong credit score. With homes still flying off the market and many ending up in bidding wars, you’ll want to get pre-qualified for your mortgage and also ensure you have enough saved in your bank account.
Most importantly, know your financial limits and live within your means. If you already own a home and were looking at moving, consider options such as refinancing and utilizing the savings or getting a home equity line of credit to cash in on your home’s value and help transform it into your dream home instead of moving.
Saving for Retirement
The study from WSFS found that 38% felt saving for retirement was a goal that was out of reach. When it comes to retirement planning, your investment strategy during different life stages is likely to change, but you’ll want to start saving as early as possible to take advantage of compound interest.
Consider opening an IRA account or contributing to your employer-sponsored 401(k) if that is an option. The sooner you start putting money into these accounts the better, and what may seem like a small contribution will grow over time.
If your employer matches a portion of 401(k) contributions, try to max out that matching contribution so you’re not “leaving money on the table.” It’s also important to increase your retirement fund contributions over time as your salary increases or when you find yourself with extra money in your savings account.
If you were unable to contribute as much as you would like toward your retirement earlier in life, you can start making “catch-up” contributions to your 401(k) account starting at age 50.
Fifty-Eight percent of respondents to the WSFS study said they actively avoid thinking about or navigating their finances out of fear that “they’ll mess it up.” It’s important to always remember that saving and budgeting are a lifelong journey and that it is never too late to start.
If you find yourself still feeling overwhelmed with budgeting and planning for your future, consider speaking with someone at your bank or a financial advisor, and they should be able to help you build a plan and set you on a path toward success.
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Read our financial resources from your friends at WSFS.