Achieving financial security takes discipline, knowledge, and actions appropriate for your age. To help you do so, we’re introducing a five-part series of blog posts specific for each decade of adulthood: 20s, 30s, 40s, 50s, and 60+. We’ll give you concrete suggestions on what matters most in each age category and link to videos or other blogs for more detail.

Everyone will have different considerations based on these circumstances. This is therefore an approximation based on what has been relevant for most of our clients in different age brackets. Readers should adjust the recommendations to their own lives as pertinent.

The principles of financial planning – making time an ally, living within your means, sticking with a process to evaluate your plan– apply to everyone. But the best time to embrace these principles and act upon them is as soon as you can. In your 20s, you’ll want to develop the good habits and frame of mind that will set you up for a secure financial future.

Save For Retirement First, Pay Off Student Loans Second

At many points in your financial journey, you’ll need to pick one course of action over the other – even if they both seem worthwhile. The first decision you’re likely to face comes once you’re earning enough to more than cover your living expenses.

If you borrowed a significant amount to attend college, you may wonder which comes first: paying off the debt or putting money into your retirement plan. Most likely, saving for retirement is the better option. Student loans typically are set at low interest rates, and you can generate a better return with a retirement account. Even if the rates were equal, you come out ahead by reducing your taxable earnings.

If your employer makes a matching contribution, that’s even more incentive. Take advantage of the compounding interest rate that time provides you at this early age and you’ll be well-prepared for retirement decades from now. And if you have the option, consider putting money in a Roth IRA or Roth 401(k). Your tax rate now is likely to be less than it will be when you retire, so better to pay taxes now than 40 years from now.

One caution: Get advice on the type of investments that are best for you at this age and realize you will likely need to adjust them in coming decades.

Take a look at this video on Lake Road Advisor’s core investment principles:

Establish An Emergency Fund

For many people fresh out of college, landing a job that lets them keep up with their expenses is a cause for celebration. The temptation is to go out and buy a lot of things you’d always wanted. The better move is to put aside a portion of your salary to build up an “emergency fund.” This is the money you’d rely upon should something unexpected occur. That job might disappear or you have an accident or illness that keeps you out of work for months.

On a more positive note, you might want the flexibility to change course – move to a different city, take a specialized training course to qualify for a better position, etc. The rule of thumb is to have three to six months of expenditures saved as part of that emergency fund. Throughout your working life, you’ll want such assurance that should something happen, you’ve got a financial cushion beneath you.

Learn more about emergency funds and tying your investments to your goals:

Be Careful With Credit Cards – Live Within Your Means

Taking out a credit card and paying it off on time each month gives future lenders the assurance that you’re a trustworthy borrower. That will qualify you for larger purchases, such as a mortgage. But be careful. It’s easy to get carried away and buy items that you don’t need or can’t afford when you have that piece of plastic in your wallet. Before you know it, you’ll find yourself struggling to pay off the monthly bill and chew up your income paying the high interest rates that credit cards carry.

You can avoid this by being mindful of your cash flow and living well within your means. In our experience, families that can save greater than 20 percent of their income and buy less than they can afford are the ones that enjoy the most financial success. That’s not to say you shouldn’t have fun in the meantime, but keep it all in balance.

This video explains the three buckets of a smart cash flow system that can help you achieve that balance:

Lake Road Advisors (LRA) is a virtual wealth management firm headquartered in Corning, New York, with offices in Ithaca, NY and Portland, OR, founded by Paul Sydlansky, CFP in 2016 to provide financial planning for busy mid-career professionals with young families. LRA partners with couples long-term to build financial plans that allow them to live the life they want while preparing for the future by making smart money moves to grow their wealth. They can be reached by phone at the Corning, NY office at (607) 438-2914, Ithaca, NY office at (607) 463-8400, or Portland, OR office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com/

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.