Deducing the vital financial tips for the twenty-somethings of the nation
As more and more students head back to different campuses within the country, they will now be making a lot of decisions like “What subjects should I take?” to the mundane “Where can I find the best bagels?” And among many decisions, one of them would also be “How many credit cards should I have?” Well, this is not a theoretical question as making the right choice while taking out credit cards can have a positive impact on the student’s finances in the years to come. That’s because a credit card used properly can provide you with a long-lasting credit reference and can also help you with a good credit rating. But when you screw it up, you pay the price for a long time, sometimes even till the time you’re carried to your grave.
The responsible students can benefit from using a credit card properly and they can get one before they graduate from college. Doing so allows them to build a positive credit history and for your information, employers check their credit history and credit score before recruiting them in jobs. Students can not only grab the best jobs but also rent a place to live in, finance a car, a home and even get an insurance policy with low and reasonable premiums. Despite all the areas where a student’s credit score is checked, very few students are actually serious about their finances. Missed payments, over utilization of credit limit are some ways in which you can hurt your credit score.
4 Vital personal finance tips for the twenty-somethings
If you’re someone under 30 and you’re already planning your financial future, you’re ahead of the lot. Technically, at this point of your life, you should consider your personal finances as your company’s balance sheet where your aim should be of maximizing your assets by saving and investing, controlling your liabilities and utilizing your credit and debt responsibly. Here are a few simple personal finance tips that you should adopt while you’re young. If you can get these things right early, you can be sure of having a bright financial future.
- Live within your means: You might see you peers spending a luxurious and extravagant life but don’t get inspired by them. The key is to live on less than what you earn. While you’re making your spending list, leave yourself some wiggle room that you don’t need to spend up to or above your credit limit. Always aim to save more and spend less on your next paycheck. Get an experienced financial planner who can help you devise a long term plan for your retirement goals and also save between 3-10% of your monthly income, irrespective of what you earn.
- Keep fattening your piggy bank: Although it is an old song but it still remains a hit. Save, save, save, even if you earn a few bucks in the month. When young workers first start out in the job industry and try to establish a career of their own, they’re often tied down by student loans and some other large purchases like car or their first home. Most often, they even have credit card debt which is the most expensive type of debt. Hence, to maintain all the minimum payments, you need to keep fattening your piggy bank.
- ‘D’ stands for discipline and not ‘debt’: The sooner a person learns this fundamental philosophy, the better for him. If you have debt, whatever may be the source, always organize them according to the interest rates and start paying them down in a descending order. Pay off the balance with the highest interest rate and then move towards the debt with the second-highest interest rate. You may also try consolidating them through the debt consolidation companies. Adopt a financially disciplined life and make sure you don’t incur more debt before you repay that which you already owe.
- Analyze and adjust your spending habits: For example, on an average, let’s say that you spend $10 everyday on lunch. This means $50 a week and $2600 annually. If you make $30,000 a year, you could potentially save up to 9-10% of your annual salary by brown-bagging your lunch. This kind of scrutiny needs to be added to drinks, coffee, cocktails after work and also dinner outings. By reining in those non-essential expenses, you will definitely have more money to throw into your IRAs, 401(k)s and mutual funds.
Apart from saving for your long term financial needs, you should also save for your short-term needs too so that you immediately don’t need to raid your emergency funds and savings account in order to meet your needs. Try to sock away at least 3-6 months worth of expenses in a savings account so that you have a considerable amount of money during emergencies. Take advantage of employer-sponsored retirement plans and save your pre-tax dollars for your future.