This conversation centers around insights from Racquel Oden, Head of US Wealth and Private Bankers at HSBC, with edits for brevity and clarity.
With experience at major banks like HSBC, JPMorgan Chase, and Merrill Lynch, I’ve provided plenty of guidance on financial matters such as saving, budgeting, investing, and retirement plans.
For my family and friends, my primary advice is straightforward: start managing your finances as early as possible.
It’s never too early to begin saving or investing. Whether your goal is a home, a dream vacation, a beautiful wedding, or even retiring early, there are steps you can take right now to set yourself on the right path toward achieving those financial aspirations.
If you’re employed, prioritize retirement and personal savings
It may seem distant, but contributing to your 401(k) is essential for retirement savings.
Simultaneously, having enough in a personal savings account to cover living expenses for six months is crucial in case of unexpected job loss. I refer to this as having short-term cash on hand, which can help cover essential bills like rent, car payments, and groceries.
Begin investing with your available short-term cash
Many young investors seem uncertain about when to start investing. There’s often this mindset of, “I need to invest all this money.”
I want to change that perception. Any amount of money is typically better invested in the financial markets than left in savings accounts. Having that short-term cash will also enable you to establish another account to prepare for future investments.
Develop a financial plan with a financial advisor
A beneficial aspect of consulting a financial advisor is that most banks offer this service for free initially.
Planning is essential. It lets you reflect on what you aim to achieve financially. Are you looking to buy a house, plan a wedding, or embark on an adventure? With a clear plan, you’ll find it easier to consider goals beyond mere retirement.
I suggest thinking of your financial life in terms of different “buckets.” For instance, saving for a home can be one bucket, while other financial objectives may have varying timeframes. This comprehensive approach can alleviate some of the anxiety related to investing.
Seek reputable financial resources and avoid ineffective ones
I enjoy browsing TikTok and Instagram, but it’s wise to ground yourself in reliable resources first.
Contact a financial advisor at a bank for trustworthy advice. While social media influencers can be entertaining, traditional sources should take precedence when it comes to financial matters. However, that doesn’t mean you can’t explore your options and choose a financial advisor that suits your needs.
Make your money work for you
Currently, checking and savings accounts often offer minimal interest. A short-term investment vehicle, like a Certificate of Deposit (CD), could yield a more attractive fixed interest rate compared to regular savings accounts.
For example, a short-term investment in a CD might earn 4% interest over about nine months. Just remember, interest rates do fluctuate, so staying informed is crucial.
Balance saving and investing against student loan repayments
While it’s advisable to make at least the minimum monthly student loan payment, focusing solely on paying down loans might not be the best approach. Prioritizing having some liquid funds allows your cash to work for you.
If your money is simply sitting in a checking account, it’s essentially inactive, despite the need to pay off debts. Yet, paying off loans might improve your credit score, which is also a factor to think about.
Have any experiences with financial planning that you’d like to share? Feel free to reach out.
