I know what you’re thinking – hey, I’m just starting my career, so why would I be planning for retirement???
That’s a good question – indeed college grads would feel the same way – that they are too young to start thinking about retirement.
The what if the question was phrased a different way. What if the question was: should you start planning to get rich? I would suspect that most students have gone through college in order to land a better job, have a great career, and make some good money along the way.
Planning for retirement sounds a little bit boring at your age – but planning to get rich and comfortable sounds a lot more interesting, doesn’t it?
Now is a pretty good time to start thinking about how you can accumulate some money for later in life. It is possibly a mistake to start thinking about that issue 20 years down the track. That’s because there’s far less time to build wealth by then. Check out another article on this website that gives you an insight into Warren Buffett’s mentality.
There is also another article on College Aftermath that describes the ABCs of 401(k) investing. But not everyone might end up working somewhere that offers this retirement plan option. Some people will work for small companies, family-owned businesses, or are self-employed professionals, contractors or business people. And of course, in today’s world, some of you will pursue the life of an entrepreneur.
However, everybody needs to have money saved for the time when they will not have an income – that is, when they retire (or when you don’t want to work for a while – which is likely to happen sometime in your career).
A financial tip for life
If you can live on 100% of your income then you can live on 95% of it.
The idea is to save at least 5% from your earnings on a regular basis. This amount should be locked away in some form of growth-oriented fund. Over time that 5% will grow and compound and build into a very attractive amount. The beauty of this arrangement is that you will hardly miss 5% of your income – but will be very happy when there is a growing investment available to you.
Yes, you may have enormous student loan debts and those do need to be paid. However, paying off debts exclusively will not help your savings. The only thing that will help you save money is to save money. So start slowly and live on 95% of your income only – again review the article on Warren Buffett and his view of building wealth.