The secret to accumulating wealth is straight-forward: live well beneath your means, invest the surplus and diversify those investments. But the mix and balance of those investments shifts as you age. This is the first of a series of articles on life stage investing. Thanks to a question from Sahra in St. Mary’s County, Maryland, we’ll take a look at goals and strategies for the young and single.
I’m 25 and have some money saved up. I would like to know what would be the best was to invest and to make money on my money.
First, Sahra, let me congratulate you on your foresight. Many young adults don’t think of saving or investing for the future and come up short when they get ready to retire.
To get from here to there, you need a road map. What are your plans/goals? What’s your time frame? Are you planning on getting married, having kids, buying a house? What’s your risk tolerance? Once you identify those answers, we can then map an investment strategy for you.
My biggest goal right now is to buy a new car. I would love to get married. I have been with the same guy for 7 years in June. We haven’t done it yet because we just don’t have the money. We have been talking about kids a year after we get married but maybe we will work on getting the house first. So within the next two years or three would love to have this all in order.
Buying a car is an attainable goal. You don’t need to buy a new car, as it will lose value as soon as you drive it off the dealer’s lot. A certified used car cost less than a new car and has a lower depreciation rate. You may save on sales taxes, dealer preparation and registration fees, and a lower down payment.
Keep saving your money regularly (invest the maximum in your employer-provided savings program) and consider modest wedding plans. The average cost for a wedding is $25,631, not including the honeymoon. The dresses, rings, tuxedos, flowers, DJ, photos/videos, invitations, gifts and favors, transportation, venue and wedding planner all add up. Downsize your fantasy wedding and the money you save (and what you get as gifts) can go toward a down payment on a home.
Wait on the kids (it costs about $250,000 to raise one up to age 18….add 4 years of college and you get the picture).
The guy I want to marry just finished school. The schooling was $42,000 so now he has a loan to pay off. If I get married to him will I have pay off the loan or be tied to the loan at all? We have been together for going on seven years and could wait till we get everything in order like we have been doing.
The good news is that no, you won’t be responsible for his debts. Only the person who signed (or co-signed) for the debt is liable.
But the bad news is that that debt burden will affect your married lifestyle. There will be less disposable income and the student loan debt will act as a drag on the household budget. If the payment is late or not paid, it will affect your fiancé’s credit score and will hurt when you apply for a mortgage and both credit reports are checked. As a couple, it would be in your best interest to help him pay off the student loan debt as quickly as possible.
Make sure you put all the financial cards on the table before you get married. Know what you’re getting into.
Lastly, Sahra, take a look at my video from February 29th for the Nightly Business Report. Keep me posted and good luck!
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