No Time Like The Present

Gen Xers should start investing for smooth sailing in the future

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Congratulations! You’re in your 20s. At long last you’ve finished school and escaped the parental microscope, with few responsibilities besides yourself. Landing your first real gig has given you the funds to live the life you’ve always dreamed of. The phat crib, the fly car, the designer clothes-it’s all about you.

But hold it. What about your future? Do you have enough money for emergencies, that wedding you’re planning or a down payment on a house? What about retirement? The more money you save in your 20s, the less you’ll need to put aside when you get older. A study conducted in July by Scudder Kemper Investments revealed that people age 22 to 33 are more financially savvy than preceding generations. Seventy-one percent of Generation Xers regularly save a portion of their income, according to the study, with 67% saving money outside of 401(k) plans, about the same frequency as baby boomers.

However, when it comes to African Americans in their 20s, the outlook is somewhat different. A study commissioned by Ariel Mutual Funds and Charles Schwab & Co. and released in May found that African Americans, particularly women, still lag significantly behind whites in investing and saving their money.

Investing a set amount of your income each month will put you on the fast track to a stable financial future. Read on to find out how much of your hard-earned cash you should be putting to work in the form of stocks, mutual funds and other investment vehicles.

Because you’re young and won’t need the money right away, you can put much more of your investment dollars into aggressive investments like stocks, rather than more conservative investments such as Treasury bonds or certificates of deposit.

As a general rule of thumb, subtract your age from 100% to determine how much of your money you can allocate to aggressive investments, advises Simone Thompson of Edward Jones Investments in Brooklyn, New York.

If you start investing in your 20s, you’ll end up with more money-and perhaps be able to retire earlier-than your older counterparts. Investing $100 a month beginning at age 25 at an assumed rate of return of 12% will grow to more than $1 million by age 65, says Thompson. If you wait until age 30 that $100 per month will only amount to $649,000 at age 65. (You’ll need to invest $200 per month to reach the $1 million mark.)

But before you get started, financial planners say, you should get out of debt and save three to six months’ worth of your salary for emergencies. It’s become a cliché by now, but the rule is: pay yourself first. Martin Harris, president of M.H. Harris Financial Planning Services in New York City, offers the following guidelines: Everyone should invest 5% to 10% of their take-home pay. Rent or mortgage payments shouldn’t eat up more than 28% of your income. Other debt payments such as car or student loans and credit cards shouldn’t exceed 36%.

Even if you can’t afford to invest $100 or

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