In everyone’s life there is a time when certain long term goals and the savings associated with them may not make so much sense. Retirement, children’s education or even buying a house may not be the top priorities if you’re a twenty-something year old who just started a job after college.
Although you probably will be fine if you take several years before you being researching and thinking about such future matters, postponing this for many years may not be a good idea and it can adversely affect your lifestyle, sound financial status and ability to provide a stable life for yourself and your family.
It is never too early to start planning, but even if you decide to postpone your savings in themselves, you should at least not do anything that harms your standing financially.
Here are a few pitfalls to avoid.
Racking up debt
If you’re early in your career, without a big family and commitments, you should be able to live within your means and avoid debt as much as possible. Of course, not all debt is evil. If you’re financing a car to avoid shelling out lots of cash, which you might not have, that can be OK as long it is kept within reason. But if you’re taking out credit cards to live a luxurious life that is well beyond your income and being dragged into a debt spiral, you may be destining yourself to financial troubles that will spread on many years to come.
The point is when you have a limited income and probably still-limited commitments, try to make them work. Even if you end up not saving much for several years, you at least won’t be carrying the burden of debt that can exhaust your resources for many more years when you really can’t afford it.
Damaging your record
Whether you live in a country where credit history matters or not, make sure that you stay out of trouble with banks, creditors, etc. Credit history is essential in getting finance for homes or even for other major purchase. Having a poor credit history simply can mean that you higher rates and generally less attractive terms. In addition, it may take years to fix credit problems.
To avoid hits on your credit report, make sure that your utilities are paid on time, your credit card balances are under control and, of course, that you don’t miss any payments. It depends on how credit is being reported, but in many places even your rent commitments can impact your score.
Generally you don’t really need to do much except for being current on your obligations and monitoring your statements closely to make sure that you’re not missing anything.
Making assumptions
When you plan your financial future, you need to be conservative. Don’t make assumptions like being able to work until you’re 70, having no children or being fine with always living a modest life. Of course, you know your situation that best, but leave some space for yourself to be able to change your mind. It is a fact that people’s perceptions on work, life, retirement and acceptable living standards evolve as they proceed in life, so err on the safe side by planning for a life that may now seem slightly too comfortable for you.
In addition, your assumptions about your income should also be realistic. Factor in mishaps such as job loss that can simply drain your savings in a short period. The more you look at the years to come through a down-to-earth view, the more likely you will find more money set aside in case of a crisis.
That is not to say that you should give up on your ambition, take the first secure job and put money aside for long-term goals. Just have some balance that helps you navigate the future.
Rania Oteify, a former Gulf News Business Features Editor, is a Seattle-based editor.
