Many financial gurus, career advisors, counselors, and even teachers advise young people to take things slow. They suggest that these young adults have plenty of time and shouldn’t be in a hurry to streamline their careers, start saving, or even settle down. They encourage young people to do what their heart guides them to do, live a carefree life, and enjoy their youth while they can.
While this is great advice, it’s based on the misconception that everyone will live a long life, that everyone will have the time to streamline things later, and that the lives of these young adults will follow a smooth, upward trajectory. Even the average 20-year-old will agree that this is rarely the case. In fact, if you look at the billionaire and millionaire lists around the globe, they are getting younger every year. Younger people are making more money than ever. Starting young has usually been the number one reason many successful people are who they are today, whether that is in business, sports, entertainment, or any other industry.
If you are just starting your career, here are a few reasons why you should start planning for your later years today.
1. Compounding Effect
Warren Buffet, one of the richest men on the planet and one of the best investors of our time, talks a lot about the snowball effect. What seems like a small investment today can snowball into a much bigger, and faster-moving asset in just a few years. But to get the most out of this compounding effect, you need to start early. The longer the distance the snowball has to roll through, the larger it can get. He is often asked what his top tip would be to his younger self, and he always says, “I would have told myself to start earlier”. He started investing at 12 years old.
2. Market Volatility
The recent pandemic of 2019 has been the perfect example to illustrate just how unstable both the physical and financial world is. The financial markets around the world still haven’t been able to shake off the effects of the pandemic. Even in countries such as America, where the economy is extremely durable, it has been challenging for employers, employees, and investors. According to a highly referred Pittsburgh financial advisor, working with an advisor may not protect you from such a disaster, but it does certainly make it possible to create a portfolio that can withstand such an economic downturn. One of the biggest challenges, other than natural calamities that are out of our control, is finding a suitable investment advisor. The sooner you can find one, the more time you will have to make profitable investment decisions and safeguard yourself from market volatility.
There are certain events that just happen without any sign and certain opportunities that arise out of the blue. Then there are those things that show some promise, and you can forecast that this might grow into something very profitable down the road. However, whatever that technology is or whatever that profitable sector might be, in order to get in on the action you need to have money. You don’t need to have too much, but the more you have, the better it is. The best way to be prepared for the opportunity is to start saving today, so when a profitable adventure presents itself to you in the future, you have the resources to cash in. Most people don’t profit from these moments because even though they know they are coming, they don’t have the resources to do anything about it.
4. Emergency Funds
Preparing for your retirement is also about preparing for a rainy day. It’s not necessary that you will only need the extra money 30 or 40 years down the line when you finally retire. There is no telling when an unfortunate incident might come up, and you might need some extra cash to help yourself or a loved one. Rather than thinking of it purely as a piggy bank for after you retire, think of it as a backup fund that you can use anytime you need to. In any case, having some extra cash in the bank is always a relief.
Many young adults are also hesitant to start a savings fund or invest in a retirement plan early since they want to use their earnings to improve their current lifestyles. While there is nothing wrong with enjoying the finer things in life, securing your future should be just as important. Investing in a retirement plan today will help you enjoy a better life tomorrow, and even if you aren’t earning a lot and can’t allocate a lot to the savings deposit, a little is better than nothing.