Finance - How to save for the future when it is uncertain

How to save for the future when it is uncertain

A friend recently sent me a text message saying she spent the whole weekend obsessed with money.

"I do not know what kind of life I want to live, nor what I want to save, or even if I want to get a car / house / retirement," he wrote. "But I want to be as solid and financial as I can."

I thought of getting rid of some of the strategies that I had the chance to absorb as a personal finance correspondent on CNBC. Create a budget Open a retirement account. Save as much as you can. Avoid debt.

However, I felt that if I started reading these tips, I would not touch on the essence of her concern, and she did not know what was preparing him financially. It seemed more complicated than if I had sent a text message stating that I wanted, for example, to own a home by 2030. Was it?
It makes sense that many young people can not easily imagine where they are going. Forbes describes an article entitled "Youth and Anxiety: The Millennium Generation on the Move", how rare it is that members of the millennial generation remain planted in one place for a long time. A Gallup poll showed that the millennium generation is likely to jump from one employer to another more than previous generations.

"There are not as many jobs for life as they have been there," said Stephen Brobeck, a senior member of the Consumer Federation of America.

The goals of previous generations are not necessarily the Millennium Goals: Twenty-five per cent of them do not plan for marriage and 30 per cent do not have a child, according to the TD and Ameritrade Millennium Survey.

In addition to cultural changes, the economic climate has calmed the goals of many young people. With the increase in salaries, childcare, medical and education costs have risen.

The researchers found that about 30% of the Millennium Generation do not expect to retire, and a quarter of them say they will never buy a home. "Most of the millennium generation no longer believes there is long-term security," Probek said.

"When a person's life cycle is a question mark, it may be difficult for her to plan," said Sarah Raboso, a researcher at the Stanford University Life Development Laboratory.

Rapuso and other Stanford researchers use virtual reality technology to show people their old incarnations, hoping to develop empathy with their 70- or 80-year-old selves.

"People see their future as strange," Raboso said. "When it comes to motivating to save money, they do not feel they are doing it themselves."

So what does it mean to strive financially, as my friend wants, in the face of uncertainty?

"The focus is on what is not changing," said Greg McBride, chief financial analyst at Personal Finance, Bankrate.com. "There are some basic steps for financial security, no matter what course it takes in the end," he said.

McBride defines these basic concepts as follows:

Spend less than you earn.
Create an emergency savings account (ideally, six months of stored expenses);
Debt resistance;
Saving for retirement.
Caroline McLanhan, a certified financial planner and the Life Planning Partners Foundation in Jacksonville, Florida, said it was quite natural not to set long-term goals clearly. "We can not predict the future," McClanahan said.

When its clients are not sure where they are in 20 or 30 years, they say they focus on their short-term aspirations. It may be paying off a credit card or finally returning to school for another title.

It may be useful to note these objectives.

"The most important reason for saving should be on everyone's list:" What if I can not work anymore?

It may take a long time to answer this question in the affirmative. That's why experts say the importance of starting saving early, no matter how uncertain your future is, can not be overstated.

Here's a quick example of why. If you invest $ 5,500 a year to retire between the ages of 25 and 35, you will have about $ 620,000 waiting for you at the age of 65 years. About $ 556,000). This, of course, because of the strength of compound interest.

"Time is the greatest asset to making money that an individual can own," said Ed Slott, an expert on retirement savings.

"For young people who do not know exactly what they are saving, Roth's retirement account may be the best place to stop their money," McLanhan said. Although Roth IRA is technically a technical account, you can withdraw any funds you have deposited at any time without paying fines. (You can easily open an account online or personally at Fidelity, Charles Schwab and elsewhere).

"If you end up without buying a home, you now have a good advantage in your retirement savings," McLanhan said.

This can result in anxiety if you sacrifice the quality of your life now in the future, but it will be really encouraging to see how your savings are realized.

"You can increase your chances of getting ready for anything that is looming now, by identifying good health measures," said Liz Weston, columnist at CFP and Personal Finance at Nerdwallet.

According to NerdWallet, the first steps for financial security include setting up a contingency fund, making the most of any retirement plan you have at work, and repaying any debt with a credit card.

Once you select these fields, increase your savings gradually. You can also invest for purposes other than retirement (consider one of the many thief and consultant applications that make it easy).

"Think about the deeper questions, but do not let them delay you," Weston said.

"The most important thing is to start," he said.

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