Financial Planning Tips For Young Professionals
Yesterday I was asked to speak to a group of young professionals at EY Parthenon in Chicago. They were interested in financial planning tips for people just beginning to build a foundation for their financial future. It is interesting that many of life's transitions occur during the first years after graduating college. People are starting their first jobs, renting an apartment, then deciding to purchase a home. In come cases, they go back to school, or switch careers, and need to know how this will impact them financially. If they get married, they are combining their finances and have to make decisions on whether all of the money goes into one pot, or do each of them keep separate accounts and jointly contribute to household expenses. Once they have their first child, they have additional expenses, such as childcare and more spending on food and clothing and have to decide whether they will stay a dual income, or single income family. There are so many transitions in the ten years after college, that it is often overwhelming to determine what financial decisions make the most sense.
We discussed how to track spending, develop a budget, and how and where to save for an emergency fund. We also talked about taking advantage of the company matching in the 401K, and how to decide whether a Roth or Traditional 401K is more appropriate. Buying a new home was one of the topics that was most relevant to this group, and we talked about how important a credit score is to obtaining the best interest rates and qualifying for a loan, and what could be done to improve it. The presentation also touched on how to choose the best allocation for a portfolio depending upon age and risk tolerance, and the importance of tax efficient investing. It is also important to understand the employee benefits package, and to know how to use an HSA account as an investment vehicle since it is tax deferred upon contribution, grows on a tax deferred basis, and is not taxable upon distribution as long as the funds are used on qualified medical expenses.
It is so important to seek out advice from a qualified financial planning professional who is also a fiduciary, or acts in your best interest. If you would like to schedule time to discuss transitions you are going through, please contact me. Financial planning is a process, and your plan needs to change as you navigate these transitions in your life.
About the Author
Patti Hughes is a Chicago Fee-Only Financial Planner. Lake Life Wealth Advisory Group provides comprehensive and objective financial planning, retirement planning, and investment management to help clients organize, grow and protect their assets through life’s transitions. She is a fiduciary, and does not sell products or earn commissions, so she truly acts in the best interests of her clients.