“Compound interest is the eighth wonder of the world,” Albert Einstein once said. “He who understands it, earns it; he who doesn’t, pays it.”
For Millennials, a simple understanding and application of basic financial principles can profoundly impact how long you will work and how comfortably you’ll retire.
Here are four financial moves to make now that can pay off big-time in the future:
Own your financial destiny. Now is the time to get familiar with basic savings and investing principles and take control of your financial future. Read books, research online, or follow blogs that resonate with your financial philosophies. Develop a clear understanding of your income and necessary expenses to guide your saving and investing decisions.
Build an emergency fund. An unexpected job loss, medical expense, or car repair can throw the unprepared into financial turmoil. Experts agree that setting aside three to six months of living expenses in an easily accessible savings account or certificate of deposit will alleviate stress and help you avoid credit card debt or dipping into retirement savings when an emergency happens.
Pay down debt. Tackle “bad debt” (that with high interest rates, such as credit cards and car loans) first. Be sure to keep up with minimum payments for “good debt,” such as student loans or a mortgage.
Start investing now. You don’t have to be Einstein to appreciate the power of compounding interest. Contributions, even small amounts, to an employer-sponsored 401(k) or your own IRA or Roth IRA, make a big difference later in life. To keep you on track, set up automatic payments whenever possible for all of your savings and investing goals just as you would for necessary expenses.
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