As a millennial financial advisor, Sophia Bera is on a mission to guide young people just like herself to create a solid financial foundation.
Bera, a certified financial planner and founder of Gen Y Planning, works with clients in their 20s and 30s. She helps them navigate through big life decisions, such as buying a home, paying off student loans, maximizing their company benefits and, most importantly, investing now for their future.
It's for that reason Bera urges young investors to create a solid financial game plan now to set themselves up for success later in life. She believes these three factors will guide young investors to financial security.
1. Maximize benefits of their employers' 401(k) plans. A big mistake Bera sees from younger investors is that many just do not fully understand the benefits of a 401(k).
"Many firms will match your 401(k) contribution" up to a specific percentage, she said. "It's free money that you are leaving on the table if you don't take advantage of the match."
2. Set money aside for unexpected emergencies. Bera believes you should have at least three months' worth of income stashed away to cover the financial surprises that life sometimes throws your way. "That may seem like a lot of money, but it can be done," she explained. "These unexpected events, such as a job loss, medical bills or other major expenses, can be stressful and costly, so it's important to be prepared."
3. Get out of serious credit card debt. Bera also urges millennial clients to find ways to pay off high-interest-rate credit cards.
It's essential to pay off that credit card as quickly as possible, she said. Why? Because if you max out your credit card and ignore paying it off, you're going to trigger an annual percentage-rate penalty that can be very costly, she explained.
If young investors adhere to these three steps, said Bera, they will create strong financial security in the years ahead.