September 10, 2022 | Posted in:

Live for Today or Save for Tomorrow? A Twenty-Something’s Dilemma

Early in your life, time is on your side. Saving even a small amount regularly over many years can produce a nest egg much larger than someone who starts saving later in life due to the time value of money. Good saving and spending habits can lead to financial stability just as easily as bad habits can create a deficit that may take decades to recover from.


Get saving

How to begin? It is much easier if you never get your hands on the money so set up payroll deductions directly into a savings account and/or a 401(k) plan. Set small specific goals, say to save so many dollars a month or a set percentage of earnings. Also track your spending and determine where you can gradually cut back and save instead. For example, give up one coffee per day, or make your own lunch two days a week.


Don’t wait

A 20-year-old who saves $100 per month for 40 years, with an interest rate of 5% will save $48,000 but it will grow to $245,246 by age 60. The money tripled. Someone who waits until they are 40 and saves $200 per month for 20 years will save the same $48,000 but it will only be worth $76,328 at the end.


Conquer student loan debt

Talk with your employer. Many companies offer student loan debt assistance or counseling. Also select auto-pay on your loan to make payments regularly. Could you send $5 or $15 extra each month? It might reduce the time it takes to pay off your loans by months or years.


Use credit wisely

Before you take out a loan or charge up your VISA card ask yourself these two questions: (1) Can I afford the payments? (2) Can I wait until later? By paying cash for purchases, you can avoid interest charges and generally spend less in the long run.


Pay more than the minimum

Sometimes you may not be able to pay off your credit card in full, but always try to pay more than the minimum. A balance of $5,000 may take seven years or more to pay off if you only make minimum payments. And since it is unlikely that you would go those seven years without charging anything else, you may never pay off the card at that rate. Do you really need ALL those streaming services? Do you want to be paying for this month’s subscription for years to come?


By Julie Strohlein, CPA

Julie Strohlein CPA

Associate Partner
Julie has over 20 years of experience in public and private accounting, representing varied clientele including the medical, legal, and real estate industries and trusts.
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