10 Steps to Financial Freedom in Your Twenties and Thirties
By Jill Shipley, Director of Next Generation Education

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On our journey to obtain independence and achieve financial success, we usually prioritize having good educational experiences, a sound résumé and a career with a nice salary. The reality is that even with all this, we can still face financial disaster if we don't develop good financial habits. The road to financial freedom requires practice and discipline. Here are a few simple steps to aid you on your journey.

#1: Start saving for your future… now!

One in four people your age will live to be 100. If you want to retire at age 65 consider how you will have the money to live for the following 30+ years. It is critical to start putting money away now to prepare for your future. The power of compounding was deemed the 8th wonder of the world by Albert Einstein and timing is the key to maximizing its power. Check out the difference between Scenario #1 and Scenario #2 below. The first person invested a total of $24,000 over eight years from age 19-26 then stopped investing. The second started investing at age 27 and over time contributed a total of $102K to their portfolio. The difference in their totals at retirement is solely due to when they started. Even if someone can only invest a small amount of money it is worth it in the long-run. Utilize website calculators such as the following to plug in your own numbers. http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

#2: Get into the habit

"Budget" does not have to be a bad word and it does not have to require an extensive Quicken project. Budgeting, like brushing your teeth, eating healthy, and exercising, is all about getting into a habit. It is as simple as monitoring how much you make and how much you spend. Running out of money is never fun, but it happens all too often. Keeping track of your spending can be a very eye opening experience (like realizing that a $5.65 latte enjoyed twice a week costs you over $500 a year) and small changes to spending habits can make a big difference. To start, collect all of your receipts for the week in a basket or your wallet or jot down expenses on your iPad. At the end of the week sit down with a calculator and add up how much is spent by category (eating out, shopping, rent, etc). Do this for four weeks and use the average spent in each category as your budget. If you end up with a negative balance (income – expenses) look at the categories to see what you can cut out. Monitor your spending on a monthly basis and change the budget as your life changes. This will allow you to take control of your finances and free up some extra money to start saving for your future. Consider using online tools such as www.mint.com, www.BudgetTracker.com, www.BudgetPlus.com or apps such as YNAB, ACE Budget or Budget Planner.