5 Key Financial Planning Tips for Young Professionals

When you’re in your twenties and thirties, the future can feel so far away, especially since you’re busy building your career and enjoying life as a young professional. But you don’t want to neglect financial planning. From estate planning to investing for retirement, preparing for your financial future is crucial, and you do not need to wait to take care of these tasks. Working with the accountants at Smithtown Tax Company LLC makes the process easier! Here are a few financial moves that every young professional should make.

Calculate Your Assets

In order to figure out what kind of financial goals you should set, you need to calculate your assets to determine your starting point. MoneyCrashers states that you should consider the value of your home, vehicles, the balance in your savings and investment accounts, and any other significant, valuable items you own.

It’s important to come up with an accurate assessment. Therefore, if you’re a homeowner, you’ll want to evaluate your home equity using the right method. Start by researching the current value of your home, and then subtract the amount you owe on your mortgage from this figure.

Estate Planning

You may think that you won’t have to concern yourself with estate planning until you’re nearing retirement. But it’s a good idea to meet with a professional to discuss estate planning when you’re in your prime working years. FJY Financial recommends establishing a durable healthcare power of attorney, a living will, a HIPAA privacy waiver for your medical records, and a durable financial power of attorney.

Establishing Trusts

You do not have to be wealthy to set up a trust fund for your beneficiaries! If you have assets that you want to pass on to specific people, such as your children, make sure that you set up a trust early on. No matter what happens in the future, you can rest assured that your trust will provide for them financially. You will want to work with a lawyer to create your trust to make sure that you’re fulfilling all of your legal obligations.

Invest for Retirement

Don’t wait to start investing for retirement! If you haven’t already opened a retirement savings account like a 401(k) or Roth IRA, now is the time to do so. Aim to contribute about fifteen percent of your income to a retirement account per month. Investing this money means that it will grow as you accumulate compound interest over time! By the time you turn 30, you should aim to have about the equivalent of your current salary saved. Keeping this figure in mind can help you set goals and save accordingly! You’ll want to create a realistic budget and incorporate monthly savings so that you’ll be able to “pay yourself” first.

Plan for Healthcare Costs

As you envision your financial future, you cannot overlook the costs of healthcare in retirement. It’s always a good idea to consider what you’ll do to cover these expenses well before the bills come in. For instance, you could open a Health Savings Account (HSA) if you’re eligible for one through your current insurance plan. Additionally, you can make larger contributions to your retirement savings account with healthcare expenses in mind so that you won’t be caught off guard by these costs in retirement.

Financial planning can seem intimidating and complicated at first. But any young professional can take care of the basics of estate and retirement planning. Knowing that you will be secure in the future will bring you peace of mind!

Ready to start making financial plans for your future? Smithtown Tax Company LLC can guide you through estate planning. Call us today at 631-360-0862 to get started.

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