If you are a young professional and you do not feel like you know exactly what you should be doing now that you’re finally making money, you are not the only one.  Many young professionals in today’s economy are not sure what they should be doing with their money, but deep down know that they should be doing something.  Often times, young professionals are busy launching their careers, starting families, and spending time developing their skills so financial planning takes a back burner because they have “plenty of time to figure it out.”

So why is it important to have a plan for where your money goes?  The answer comes from many young professionals watching their friends and family struggle to either have enough income later in life to do the things they enjoy or watching them work long past the point in life they wanted to.  For many young professionals seeing this play out is a motivating factor to not be in the same situation.

To give a 30,000 foot view, we have been working with several young professionals who are in different places, but need to have a plan for their new found discretionary income.  The first young professional works in the medical field and has spent years in medical school and residency fine tuning his craft and training for this day.  Recently, this young professional landed his first position with a local hospital and his hard work and training is paying off.  At this point in their career, he is finally making more than $50,000 per year and has significant discretionary income.  Although discretionary income is great for young professionals, without a financial plan to direct where that money is going there is the temptation to spend frivolously.  The financial plan we created walked him through what he could expect his cash flow to look like after taxes and benefits through the hospital.  He quickly discovered that he would not have nearly the amount of “extra money” that he thought he would.  With that said, the plan recommended using some of this discretionary income to be used to build some emergency savings, help to protect his income and spouse, pay-off some additional student loans, and save for retirement through multiple vehicles.  This young professional is now making progress on improving his financial situation and building his wealth early in his working years.

The second young professional is in a much different situation.  He works with a large corporation and graduated from a local university in 2013.  He spends his days working on the daily grind inside the business and is hoping to move up the corporate ladder over time.  However, at this point in his career he does not have much discretionary income but is hopeful that in the next two to three years his financial situation will improve greatly.  With that said, his financial plan focuses on placing a sound financial foundation that we can ultimately build upon as his career progresses.  For now, we are focused on building a budget that works, saving for emergencies and helping to protect his income and family.  This plan gives us a starting point so that we can help him achieve his long-term dreams as his discretionary income increases.

So why is a financial plan so important for young professionals? If it is so important, why don’t more young professionals have a plan?  Here are some reasons and ideas why more young professionals don’t have a financial plan:

  • I can do that when I’m older: Many young professionals have spent the majority of their lives in school studying to master their craft, and for the first time have some extra money to due the things they have wanted to do for years.  However, one of the most important concepts to consider when it comes to financial planning is compound interest.  Compound interest allows young professionals to be able to set aside less money today in order to achieve greater long-term financial goals.
  • I don’t have the time: We often times hear that young professionals do not have the time to sit-down and build a financial plan due to their hectic work schedules, family life and other obligations.  However, the process of defining goals and putting together a financial plan to achieve those goals does not take a large time requirement from our clients.  Our process is designed in a way that extremely busy professionals can delegate the majority of the work to our team and allow us to be a resource and to do the “behind the scenes” work.  In reality, the first year is the most time consuming and takes 4-6 hours of the clients’ time based on complexity.
  • I have a plan because I have group benefits: Many times when we meet with young professionals, they feel as though they have already started their financial plan through their group benefits.  While they are correct that they have started a plan and group benefits are a solid base, many young professionals are not exactly sure how those benefits work and companies can only do so much for their employees.  We as planners use those group benefits as a base to build out their financial plan while helping our clients to understand exactly what is provided to them at little to no cost through their employer.
  • We’ll get to it after _______: Young professionals are typically going through multiple life changes and for the first time in their professional careers are trying to manage relationships, time, money, careers and family.  As a result, there is always something that will come up and if they wait for the perfect time that time may never come.  Nobody plans to fail, but due to procrastination, many fail to plan.

If you are starting to make money as a young professional and are ready to see how that can impact your and long-term financial goals, we are here to help.   Contact us today to meet one of our professionals with the experience and expertise to provide the answers you need.

Securities, Investment Advisory and Financial Planning Services offered through qualified registered representatives of MML Investors Services, LLC, Member SIPC, 12 Cadillac Drive, Suite 440, Brentwood, TN  37027 (615) 309-6300.  Continuum Planning Partners is not a subsidiary or affiliate of MML Investors Services, LLC or it affiliated companies.  CRN201711-197607

 

Continuum Planning Partners Post Author
Brent Christian

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