Financial Planning for Young Professionals
As a young professional new to the workforce, choices between stocks, bonds, mutual funds, and retirement accounts will be especially daunting. Here, the financial planning process begins with a brainstorming session of life goals. Goal setting segues into data gathering, or a full inventory of your assets, liabilities, insurance policies, income, and expenses.
Onyx Investments tailors our recommendations to bridge the gap between your current balance sheet and financial milestones. We will build wealth with purpose and grow together.
The Lifestyle of a Young Professional
Young professionals are just getting started in this world. Still, it is critical to develop good habits early, and commit to intelligent wealth management, as a part of your identity and lifestyle. At this stage, a small swing of a few hundred dollars in monthly cash flow may result in millions of dollars in future net worth.
Young professionals, of course, must balance living for the here and now alongside socking money away for a fulfilling retirement. More immediate goals may include paying down student loan debt, family planning, earning an advanced degree, and first-time homeownership.
Onyx Investments will toggle through return, inflation, and taxation projections, while setting realistic expectations for your lifetime goals and making the appropriate recommendations.
Cash Management Strategies
Effective cash management strategy is the building block of all financial plans but may still be the bane of a young professional’s existence working to pare down debt, get established, and save for the future. Here, we must begin by assessing discretionary spending upon consumer items such as concert tickets, luxury retail, and global travel. Next, we may recommend a change in lifestyle, which could go as far as renting out a smaller apartment further out in The City.
After budgeting to free up additional cash, Onyx Investments will advise the young professional to slash debt, purchase insurance, and build out adequate cash reserves as a basic wealth-building foundation.
All retirement accounts feature tax deferral, which means that you will not owe taxes on dividend payments, interest income, and capital gains, as they occur within your retirement account. Roth IRA and 401(k) retirement accounts are especially important savings vehicles for young professionals.
401(k) plans allow for tax-deductible contributions, but withdrawals are subject to taxation at ordinary income rates upon retirement. As part of your employee benefits package, your employer will match your contributions on a dollar-for-dollar basis, up until a certain point.
Alternatively, Roth IRA contributions are made with after-tax money, which allows for tax-free withdrawals. A Roth IRA is key for a young professional — who ultimately expects to retire at a higher tax bracket. Retirement accounts do feature built-in tax penalties for withdrawals made before age 59 ½.
Young professionals investing money with longer time horizons can afford to take on more risks through stocks. We expect performance to be volatile from year-to-year: The S&P 500 stock market Index averages 11% annual returns, with much standard deviation through economic booms and busts.
Time affords the privilege to stay the course and even add aggressively to the pot at the bottom of the market – to profit significantly from recovery. With time and maturity, we will advise you to gradually take risk off the table – shifting out of small capitalization and international stocks and into more bonds. Capital preservation, not necessarily growth, becomes increasingly important as you approach retirement.
Onyx Investments is here for you – to successfully guide you through a Financial Universe stretching into Infinity. Youth shall not be wasted on the Young.