Financial Freedom at 25 (2024)

Seven Steps for Building a Strong Financial Foundation at an Early Age:

Creating a solid financial plan is crucial to achieving one’s financial goals. It’s advantageous to start planning early to increase the likelihood of reaching those accomplishments. The choices young people make today will lay the foundation for the wealth and security they will enjoy tomorrow. But for people under the age of 25, it’s difficult to know where to start. Below is a list of seven steps young people should take as they embark on their own personal financial journey.

• Write down your goals — It’s difficult to reach a destination if you don’t know where you want to go. Documenting realistic, achievable goals — both short-term and long-term — is the first step to creating a plan that will set you on a path to success.

• Create a budget — Next, determine where your money is going right now. Write down your fixed monthly expenses so you know how much you’re spending each month, then calculate how much you have left for savings, entertainment and other items.

• Make a plan to eliminate debt — Paying off large bills — credit cards, student loans, car loans, etc. — can free up money for other priorities. Once you have completed your budget, look at your debts and make a plan to eliminate each one as quickly as possible. Once one of these debts has been eliminated, you can apply what you were spending to another bill so you can pay it off more quickly.

• Start building your credit history — Debt is an important element of your credit score. Credit cards and student loans are likely the first source of your credit history, and making timely monthly payments will help build your credit score, so you can receive the best terms possible on future large expenses, such as a house.

• Start an emergency fund — Building an emergency fund will take the sting out of your finances when unexpected expenses pop up. Most experts recommend having three to six months of living expenses in an emergency fund.

• Save for retirement — If your employer offers a 401(k), it’s important to take advantage of this opportunity while maximizing any matching contributions. Funds will be automatically deducted from your paycheck into your 401(k), which will keep your contributions consistent. You may also want to set up an additional Individual Retirement Account atyour local Iowa State Bank office.

These tips are provided by the Iowa Bankers Association