Before we get into the 4 Personal Finance Tips for Young Professionals.  Consider the following two questions which you should be asking yourself:

1. What’s one of the leading causes of stress?Lack of financial security.
2. What is one of the main drivers of divorce rates?Lack of financial security.

It is very misunderstood and undervalued for an issue that is so common and pressing in modern society.

The solution: effective personal finance.

Governments, major corporations, startups, and small businesses all depend on solid financial planning to succeed. Ironically, however, most individuals who work for these entities don’t put (enough) thought into their finances.

That’s where personal finance steps in. In essence, personal finance relates to financial planning for individuals and families – often with the future in mind. Saving and investing wisely as soon as possible can save a lot of headaches down the line and even reward you.

Starting proper financial planning at age 25 rather than 35 can save you hundreds of thousands, or even millions, of dollars. If you’re a youngster working or just about to enter the job market, this is easier said than done.

4 Personal Finance Tips for Young Professionals Leading To A Long Term Financial Security:

1. Plan ahead – This is the broadest and first thing you need to consider. What are your goals in life, and what will they require financially? Suppose you’re a highly career-oriented person with no intention of getting married and starting a family. In that case, your personal finance roadmap will be very different from someone who wants to marry and focus on family life. Your approach to spending, investing, and saving will depend on what you want to achieve later, especially by retirement age. Are you the type of person that wants to own high-end properties and vacation at exotic destinations? Make sure your financial planning reflects that dream.
2. Start budgeting – Most people, especially younger ones, have issues with controlling their spending habits. Sitting down and creating a budget is a proven way to curb that problem. All you need to get started is a spreadsheet. Then, create two columns: income and expenses. The idea is ultimately to have income exceed your expenses while still living a healthy and sustainable life. One of the benefits of putting these numbers down on paper – or a screen – is so you can accurately track your expenses and work towards minimizing them. Many people realize that seemingly inexpensive (daily) extras, like a branded takeaway coffee, can add up significantly to hundreds or thousands of dollars a year. Once you have your fixed and other costs down, you will know how much to put aside as savings and what discretionary income you can realistically spend without getting into trouble.
3. Open a savings account. – To put your budgeting into action, open a savings account with your bank. Placing money into savings is the most traditional way to build up wealth for the future. What makes it so effective is that compound interest does all the work to grow that wealth. A paper published in 1994 by USAA shows the impact of starting early with putting aside money into a savings account every month. Assuming you invest $250 every month with an 8% annual return:• If you start at age 25, you will accumulate $878,570 by age 65;• If you start at age 35, you will accumulate $375,073 by age 65;• If you start at age 45, you will accumulate $148,236 by age 65.In this example, starting at age 25 will earn you $730,334 more than if you only start at age 45. Take a moment to think about that!
4. Invest in passive income streams – Another way to complement a savings account is to start investing in passive income streams. More specifically, in (relatively) safe assets like dividend-paying value stocks, government bonds, and certain funds. Investing in safer assets is a reliable way to build wealth long-term without spending time and energy doing complex financial analysis. Day trading and picking stocks are full-time jobs, so don’t “follow the herd” by investing in risky assets that are highly speculative unless you have the time to do so. Value stocks, in simple terms, are high-quality stocks that are undervalued by the market but have strong fundamentals. On average, most established and less-risky firms fall under this definition. Ideally, invest in those that pay dividends – these are guaranteed payments you will receive on a regular (usually quarterly) basis. Government bonds also provide regular payments and return the principal amount when they expire. Since the government backs them, they are the safest form of bonds. Lastly, you can look at investing in low-cost index funds and exchange-traded funds (ETFs). Instead of individual stocks, their returns reflect the overall market or industries and are thus less volatile over time. As many investors will say: at the end of the day, the market always wins, so beware of that, regardless of the choice you make!