* SPONSORED* Article courtesy of USAA
When you’re young and getting out of the military, you may have few obligations and the freedom to move across the country and start life anew. This may be the optimal time to start retirement planning and set your sights on buying your first home.
Take these steps to help keep your financial life on track:
1. Start saving in your 20s
“It’s often easier for the young working set to save for retirement than it is for their older peers,” says Scott Halliwell, a Certified Financial Planner™ professional with USAA. “They often have fewer obligations, and any cutbacks that need to be done in order to save may only impact them, not a spouse or a family.”
2. Build an emergency stash
A common rule of thumb says to keep an emergency fund equal to three to six months of expenses. Everyone needs to keep cash in the bank for unexpected financial challenges.
3. Heed the wisdom of mom and dad
“When you’re young, there’s no one to hold you accountable for bad financial decisions, so don’t be afraid to reach out to mom, dad or a friend to help keep you on a solid path,” Halliwell says.
4. Don’t skip school loan payments
Interest rates on federal student loans are often low, but don’t obtain a forbearance unless absolutely necessary. Interest continues to accrue during the forbearance period.
5. Consider disability insurance
You’re not invincible. If something leaves you unable to work, you’ll need disability insurance to help cover expenses.
6. Don’t be afraid of credit cards
Using two to three reputable credit cards is “a great way to build credit,” says John Ulzheimer, president of consumer education for the website Credit Sesame®. “They provide a large amount of buying power with almost no exposure to fraud losses, thanks to the Fair Credit Billing Act.”
7. But know how they can hurt you
Cards also can wreak havoc if not managed responsibly. “Late payments do stay on your credit reports for up to seven years,” Ulzheimer says.
8. Hands off your retirement funds
Dipping into your nest egg can be costly. “If you pull money out of your 401(k), IRA or other retirement accounts before you hit age 59 and a half, you may have to pay income taxes as well as a 10 percent penalty,” says Jean Chatzky, author of “Money Rules: The Simple Path to Lifelong Security.”
9. Understand the basics of finance
401(k), Roth, IRA, TSP: These terms can be a bit overwhelming for a first-time saver. Don’t get left in the dark.
10. Educate yourself on tax deductions
Knowing what can save you money come April 15 is crucial, says Amanda Steinberg, founder of personal finance site DailyWorth. “A lot of people pay too much in taxes because they don’t understand why deductions matter.”
Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License #0E36312), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer. This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.