Tips for Young People Who Want to Prepare for a Stable Financial Future
Photo Credit: Pexels
Tips for Young People Who Want to Prepare for a Stable Financial Future
Article by Tina Garcia of Ideas Inspired
While it may not be the most exciting topic to explore, money management is something every young person needs to learn about. Research shows that the younger generations have a low rate of financial literacy. This can set them up for future financial disasters, such as ruined credit history or insufficient retirement savings. If you're just starting to get a handle on your personal finances, consult the below tips for pointers.
Teach Yourself the Basics of Budgeting
Smart money management involves knowing just where your cash is going — and seizing control of it. You can do this through a budget. Learn how to create a zero-sum budget, which accounts for every penny you spend. The first step is to create a list of your expenses, such as rent, food, entertainment, utilities, and transportation. Then, create a list of your various sources of monthly income. Using this information, figure out where you can cut costs; for instance, you can save on food by doing more cooking at home instead of eating out. Set a predetermined amount to spend on each expense category every month. Affordable money-tracking apps allow you to keep a detailed record of your spending.
Focus On Your Career
Most likely, the steadiest form of income you’ll have as you move through your life is your job. Always be mindful of where you are in your career and where you want to go. Get comfortable with pitching your skills and negotiating for promotions and an increased salary. Of course, it’s natural to lack confidence in this area, especially when you’re first starting out. That’s why a life and career coach like Liz Strom can be such a valuable addition to your life. Reach out to Liz today to get started improving your most important career marketing tool -- your resume!
Start Saving for the Future Now
When you create your monthly budget, allot a section for savings. Even if you’re just setting aside $50 per month, this can add up to $600 in a year. This chunk of cash will be valuable if emergencies arise, such as unexpected car repairs. Unfortunately, many twenty-somethings have no savings at all, according to the BBC. When emergencies arise, they are forced to turn to family, friends, or institutional lenders for loans. This results in additional expenses thanks to interest rates. Others may resort to using credit cards, which can result in a bad credit score if they don’t pay the minimum balance back on time. Being able to dip into your savings will ensure this doesn’t happen to you. Set up an automated savings account, which takes a set amount of money from your account each month before you can touch it.
Look Into Your Investment Options
It’s also wise to start investing some money in assets that will grow with time. When interest rates are low, money kept in savings won’t grow much. Other investments will become more valuable with time, however. Real estate is one option, offering a sustainable business model with a low barrier of entry. If you buy an investment property, renting it out can offer a steady stream of income. Redfin explains there are drawbacks to investment properties, as they require time, effort, and money to maintain — including marketing and maintenance. There is also the initial cost of financing an investment property.
Protect Your Credit Score
As the Federal Trade Commission explains, a good credit score allows you to secure a favorable loan for big-ticket purchases like a house or car. If you have bad credit, you will get loans with higher interest rates — and some lenders may refuse to extend you a loan altogether. You don’t want to give up on future dreams because of bad credit you racked up in your youth. Luckily, building good credit isn’t complicated. Get a credit card in your name and start using it regularly. Always pay off at least the minimum balance due on time; ideally, pay off even more than that. Down the line, diversify your credit to further boost your rating. You can do this by taking out a small loan that you are confident you can pay back.
It’s never too early to start thinking big picture in terms of money management. Follow these tips and you will be setting yourself up for a stable financial future. While these actions may seem of minimal significance now, they can make a big difference down the line.
