For starters, pay yourself first. Set up an automatic payment each month from your checking or savings account into an investment vehicle, such as an IRA. At first, you may only be able to afford small sums - but, over time, you may be pleasantly surprised at the amount you’ve saved.
Next, every time your salary goes up, try to increase the amount you put into your 401(k) or other employer-sponsored retirement plan. Because you typically contribute pretax dollars to your 401(k) or other plan, the more you put in, the lower your taxable income. Plus, your money can grow on a tax-deferred basis.
Here’s another suggestion: Don’t be “over-cautious” with your investments. Many younger investors, apparently nervous due to market volatility of recent years, have become quite conservative, putting relatively large amounts of their portfolio into vehicles that offer significant protection of principal but little in the way of growth potential. Of course, the financial markets will always fluctuate, and downturns will occur - but when you’re young, and you have many decades in which to invest, you have time to overcome short-term declines. To achieve your long-term goals, such as a comfortable retirement, you will unquestionably need some growth elements in your portfolio, with the exact amount based on your risk tolerance and specific objectives.
These aren’t the easiest times for young people. Nonetheless, with diligence, perseverance and a measure of sacrifice, you can gain some control over your financial fortunes - so look for your opportunities.
Brian Humphrey is a financial consultant and investment advisor.