Contributor: Kristen Fricks-Roman
Company: Morgan Stanley Wealth Management
Title: Financial Advisor
As a young woman transitioning from high school to college, or from an educational setting to the full-time workforce, you have a lot to think about. One necessary life skill that is too often not taught in school or at home but can have a significant impact on your quality of life is how to effectively manage money.
As such, here are six financial considerations to bear in mind now:
Establish the right mindset. By now, you’ve probably learned that if you want to achieve something, you need to take action toward that goal. What comes before action, though, is right the thinking. Just as you eat nutritiously to keep your body healthy or get oil changes to keep your car running smoothly, making a commitment to your financial health now will give you more choices and flexibility throughout your life.
Start budgeting, saving and investing. These things may sound about as fun as a visit to the dentist, but they are the foundation of financial health. Setting up a budget enables you to lay out your priorities, determine what it will take to reach your goals and calculate how much is wise to spend each day. When you keep the bigger picture in mind, spending $5 a day for coffee might feel like a luxury rather than a necessity. Free budgeting apps can help.
Additionally, it’s important to put away and save what you don’t need to spend. It could help you during times of financial strain or in the case of an emergency.
Investing is one thing that some young people feel a sense of anxiety about. You can alleviate that looming concern by educating yourself on the fundamentals of investing. Look for online courses and tools about concepts like compound interest and its benefits over time. If you haven’t already, start absorbing information about the economy’s performance to help you gradually increase your knowledge and comfort level with investing.
Get good advice. Find someone you trust who knows you and your goals and will answer your questions knowledgeably and patiently. This might be a parent, a close relative, an older friend, a teacher or a boss, especially at first. Once you get a sense of what good advice feels like, you can look for a professional advisor who will help guide you — and hold you accountable.
Expect the unexpected. Life is what happens when you’re making other plans. You might envision yourself having a partner or spouse who supports your dreams, having children or a home, focusing on your career or retiring by a specific age. However, what if some or all of that doesn’t happen according to your plan? Save and invest in a way that will provide you with flexibility as life unfolds.
Step into parenthood with awareness. Although there are plenty of stay-at-home dads, it’s still more common for women to take a break from working to care for children. If opting for that time off, it can sometimes have both immediate and long-term financial implications. When you’re not in the workforce and making money, you are also oftentimes not contributing to retirement plans, social security earnings or overall assets. As such, you will need to plan for that by saving more in advance or finding work you can do from home or part time. Also, be prepared to engage in what could be costly retraining to reenter the workforce if you take an extended break.
Be involved. To avoid getting caught off guard by unexpected life circumstances, be sure to stay aware of and involved in your family’s finances — including with your spouse, parents and children. When you know what your financial road map looks like, and plan for contingencies, you make smarter and healthier choices for yourself and your family.
Financial well-being seems like it will be something that takes care of itself, but it’s more like a manually-controlled car than a self-driving one. To get where you want to go, you have to be the one to steer the wheel, press the gas and apply the brake in the right ways, and at the right times.
Kristen Fricks-Roman CFP®, CRPS®, is a financial advisor and senior vice president at Morgan Stanley Wealth Management, Atlanta. She can be reached at [email protected].
The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor. Morgan Stanley Smith Barney, LLC, member SIPC.