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(Tobias Keckel/Tobias Keckel/iStock)
(Tobias Keckel/Tobias Keckel/iStock)


10 steps to financial security before 30 Add to ...

As you achieve your short-term goals, set other short-term goals. Maybe you want to buy a house, earn a promotion at work or buy a new car. The constant setting and achieving of short-term goals will ensure that you reach your longer-term goals. If your goal is to be worth a million dollars by age 40, you cannot achieve this without first achieving smaller goals like having $10,000, $50,000 or $500,000.

5. Planning For Retirement: Fuggetaboutit?

Just out of school, retirement planning is the last thing on your mind. So, if you have to for now, just fuggetaboutit. If you follow the other tips, you will not only be more financially secure and prepared in the short term, but you will also be financially prepared for the distant future as well.

However, if you take a few steps now to start saving, like setting up automatic monthly contributions to a retirement plan, compounding will work in your favor, which makes reaching your goal much easier.

If you implement this pay yourself first ideal, you won't have to worry about how much you're contributing; the most important thing is to develop the habit of saving. The rest will take care of itself. You can increase your contributions when your income rises or when you've achieved more of your short-term financial goals.

6. Make Sure Your Lifestyle Costs Lag Your Income Growth

Many new graduates find that in the first couple years of working they have excess cash flow. Still used to their more frugal student spending habits, it is easy to make more money than they need. Rather than using excess income to buy new toys and live a more luxurious lifestyle, this excess could be put toward reducing debt or adding to savings. As you advance in your career and attain greater responsibility, your salary should increase. If the cost of your lifestyle lags your income growth, you will always have excess cash flow that can be put toward paying down debt, making investments, saving for a home, or achieving any other financial goals you may have.

Where many people get into trouble is that they feel entitled to a standard of living that exceeds what they can afford. However, if you keep your standard of living below what you earn, you won't have to cut back to accumulate money; instead, you will naturally have excess cash flow because you earn more than you need to live on. In addition, keep in mind that trying to keep up with the Joneses is always a recipe for financial failure. For all you know, you may make more than the Joneses, who may be funding their lavish lifestyle with debt anyway. (For more on this topic, see Stop Keeping Up With The Joneses - They're Broke.)

The good life should be a reward for your hard work, good fortune and successful planning, not something that you are entitled to. Once you have established a certain lifestyle, it is psychologically difficult to lower it. It is very easy to raise it.

7. Become Financially Literate

Making money is one thing; saving it and making it grow is another. Financial management and investing are lifelong endeavors. Making sound financial and investment decisions is important for achieving your financial goals. The more knowledgeable and experienced you are in financial matters, the fewer mistakes you will make.

Research has shown that people who are financially literate end up with more wealth than those who are not. There is a strong monetary incentive for becoming financially sophisticated. Taking the time and effort to become knowledgeable in the areas of personal finance and investing will pay off throughout your life.

8. Seize the Opportunities: Take Calculated Risks

Taking calculated risks when you are young can be a prudent decision in the long run. You might make mistakes along the way, but remember, mistakes are the lessons of wisdom. You often learn more from your mistakes than from your successes. Also, when you are young, you can recover faster from financial mistakes, and you have many years to recover.

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