I want to know how to best secure my financial future?

Question

Im 19, and a year out of high school I have been thinking a lot lately about how Im going to secure myself financially for the future? Ive been wondering about the whole deal with social security, and Im not very sure wether or not that would cover me enough to retire the way I really would like to. I went onto the ING site to see how much I would need- and it said over $2 Million! How can I reach a goal like this starting out early?

Answer 1

It's very very easy, especially because you are so young!

If you are 19 (say you turn 20 tomorrow) and will retire at 60, you have about 40 years to get that 2 million dollars.

It's because of the miracle of compound interest. I'm currently working on an article that explains the power of compounding great detail (available monday on http://www.btgnow.net), but the gist of it is that money you put away and invest today can grow to significant amounts in the future.

Let's use the ing online calculator found here:

http://www.ingdirect.ca/en/tools/calcs/S...

For example, let's say you can afford to put away $1000 tomorrow (ie initial amount when you turn 20 (great gift!), and can afford to put away $1800 ($150 per month) every year for the next 40 years. Let's take the example of an index fund that historically returns an average of 10% per year.

If you use the calculator found at the ing website, you'll notice that at age 60 you'll have just over one million dollars.

If you double your monthly contribution to 300 per month for 40 years at 10%, you'll have just under 2 million dollars.

Notice some things:

1) An annual rate or return of 10% is doable, but you might want to play with the calculator by inputting a lower rate (I wouldn't use anything over 10% personally).

2) If you have a lower rate of return, you're going to need to put more money in every month to make the same amount at the end of 40 years.

3) Notice how much of that final amount is INTEREST. In the 300/month 40 year 10% example, 1.8 million of your almost 2 million dollars is interest! That's 1.8 million dollars that is essentially free money.

4) Time works in your favour, so be sure to start saving early, and save often! every year your money is not compounding, it's a huge loss on your end result. And it's worse if you skip a year/month early on (say at age 23) than it is if you skip a year later on (say at 53). Play with the number of years input on the calculator and see for yourself!

Good luck!

Answer 2

The best way to secure your financial future is to make your money work for you.  This is something that I didn't do at an early age and looking back, wish I had.  I got caught up in the I have my own credit cards, buy now, pay later, need vs. want game, and found myself knee deep in debt including school loans, mortgage, and an ongoing Best Buy bill because I "needed" the big screen HDTV.  Now that I know better, I am still paying off my debt but am much smarter with my money since increasing my financial know how through reading books, attending webinars online, and changing my entire attitude toward money.  

You are at the right age to start making things, especially money, work for you NOW.  Read books on finances.  Look for websites that encourage you to invest in yourself and take calculated risks, i.e., real estate (one of the most stable investments you can make -- believe me, it's true).  Surround yourself with people wanting to do the same thing and find financial freedom while you are young enough to enjoy it.

It is never to late to start, and in your case, it is never too early.  Good luck in making your money work for you!!!!  That is the key!!!!

Answer 3

Never work hard for money; let money work hard for you!

http://peoplegetbusy.blogspot.com/

Answer 4

Well, retirement age is pretty far off for you, and invested money grows, so 2 mil is definitely possible. One problem for a lot of people is they don't start thinking about it before age 40, so you are in good shape. There are two important things. Live within your means (without credit card debt). And put money away every week, every month, or as often as you get paid. When you get a raise, try to save half of it. The easiest way is to have a certain amount transferred automatically into a separate account, because if you never see the money, you'll never miss it. Ask at your bank or credit union. Credit unions have lots of good gimmicks for saving, so you might want to join one.

If your pay check comes out of Washington Mutual Bank (for example) you can open a checking account at WaMu and you won't even have to cash your paycheck -- it can be deposited in your account with no effort on your part. And if you have a savings account too, a portion can be diverted every time your paycheck comes in.

Everybody has to borrow money if they buy a new car, or a house, but that is different from credit card debt. Credit card interest is much higher, and if you keep paying the minimum amount, the item that you buy with a charge card will ending up costing much more than what was on the price tag. Use credit cards for convenience if you like, but pay them off completely when the bill comes.

But the most important key to retirement and I'm serious: Don't marry someone who's irresponsible with money. They will blow your savings.

Answer 5

Start saving and investing today... every little saving helps. One key thing is to remember not to invest only in one thing. You should spread it out.

Answer 6

If you contribute the maximum of $5,000 per year to a Roth IRA, averaging a 6% return, starting at 20 years of age you will have over $1.1 million  when you are 65 which will be tax free.  If you also contribute $300 per month to a 401(k), also averaging 6%,  through your employer, that will grow to over $800K, although that money will be taxable when withdrawn.  Even though it sounds like a lot to invest each month, when the contribution is taken from your salary for the 401(k), it will reduce your taxable income and may well put you into a lower tax bracket.

Answer 7

marry a very rich man