Generation X and Generation Y differ not only in age, but in the types and amount of debt incurred. A February 2012 survey by Saveup.com found that Gen-Xer's carry an average of about $47,000 in debt, while Gen-Y only carries about $29,000. But the survey also found that 60 percent of Gen-X debt is "good debt" — mortgages and students loans. Nearly half of Gen-Y's debt is "bad debt," such as credit cards and auto loans.
The society of instant gratification has led young people to create debt that ultimately will not produce future wealth. Most simply don't have investment tips for their future. Here are four tips to get you started.
The Social Security Administration estimates that 25 percent of 20-year-olds will become disabled at some point before they retire. Disability insurance can save your family from financial ruin in the unfortunate event you are injured and can no longer work.
The cost of individual disability insurance policies vary based on your age, occupation and gender. The amount of coverage you get will also vary, but a typical "own-occupation" policy will cover about 60 percent of your total pre-taxed income. This means the policy will pay out if you are no longer able to perform the same type of job you did before the injury. You can get supplemental insurance to cover taxes and other expenses that your monthly checks don't cover. A good rule of thumb is to commit no more than 3 percent of your annual gross income to a disability insurance policy.
The best part about investing in mutual funds is that they have built-in diversification. A properly managed fund exposes investors to a number of different companies and/or commodities which can balance one another out. These investments tips for the younger people are considered conservative, but can fund your retirement if done correctly. There are three keys to making money with mutual funds:
The first is to always re-invest the dividends. The second is to choose your fund wisely. Don't be afraid to read several financial publications (while ignoring television pundits) before deciding on a stock fund, real-estate fund or a money market fund. The third is to make a decent-sized initial investment. Mutual funds require initial investments as small as $1,000. But the more you contribute, the more you can make. You can use savings, while those currently receiving payments from a structured settlement can inquire with a company like J.G. Wentworth, about selling some or all of their future payments for a lump sum of cash.
Some financial experts advise against 401K investments due to rising tax rates. The primary benefit of contributing to a 401K is the fact you don't pay taxes on it until you withdraw the funds. But if your tax bracket goes up (like it did for some Americans in 2013), you're best served investing in a taxable Roth IRA at your current rate.
Christopher Carosa, author of "Fact or Fiction: Slaying The Myth of the 401k Tax Advantage Myth," told Marketwatch that a Roth IRA is more favorable if you plan to stay with the investment for a long period of time. This argument is moot, however, if your company matches your contributions. Though fewer companies are matching contributions in any amount, 58 percent did so in 2011, according to a survey by American Investment Planners. The free money from your company far outweighs any potential higher taxes on the entire investment when you retire.
The simplest rule to follow with investing is to avoid anything you don't understand. Ask questions and do your own research to maximize your chances of success.
These investment tips for a better lifestyle are a very important lesson in life.