How Young Adults Can Get on the Road to Financial Success

By admin on March 2, 2021 0 Comments

When you’re young, whether you recently got out of college or just got married, saving money and becoming financially secure can seem nearly impossible. However, by practicing smart spending habits and putting aside a little money each month, you can get on the path to financial prosperity.

Control your spending

If you are out on your own for the first time, it might be tempting to start living a lavish lifestyle or spending a lot on going out with friends. But if you don’t have the income to keep up with your spending, you’ll quickly find yourself in financial trouble. The last thing you want is to start accumulating credit card debt. A $5,000 debt can cost you $8000 or more, depending on the interest rate and payment terms. Though it’s fine to have a credit card or two (particularly those with cash back or other advantages), you should aim to pay all your credit card bills in full every month.

Monitor your credit

Speaking of credit, you should know your credit score and monitor your credit report, in order to avoid fraud or spot erroneous information. At AnnualCreditReport.com you can get access to your free credit report granted by federal law from all three of the major credit bureaus: Equifax, Experian, and TransUnion. Many credit card companies also offer free credit monitoring services and can alert you of any suspicious activity.

Keep a budget

To get a handle on your finances, you need to know where your money is going. With a budget plan, you can keep track of your money, stay out of debt, and work toward savings goals. You can keep track of your budget in a simple spreadsheet or use free personal finance software like Mint or Buddi.

Start an emergency fund

When an emergency expense or unexpected bill comes up, do you have the money to cover it? According to a Federal Reserve survey, nearly 40% of Americans don’t have $400 in the bank to cover an emergency. To avoid putting these types of expenses on your credit card, start an emergency fund. Set a goal (typically 3-6 months of expenses to start out) and begin putting a set amount of money into the fund each pay period.

Take care of your health

Your health is your most important asset. Take care of yourself physically and mentally by eating a balanced diet, exercising regularly, and taking time out for self-care. Take advantage of preventive health care options offered by your health insurance policy, such as having an annual physical as well as blood pressure, cholesterol, diabetes, and other types of screenings.

Consider life insurance

If you were to die unexpectedly, a life insurance policy can benefit your spouse or family. Life insurance can help pay for funeral costs and medical bills, as well as cover lost income. Comparing rates and purchasing life insurance can be easy. These days, you can easily buy life insurance from the comfort of your home, and online calculators can help you determine how much and what type of coverage you need.

Begin saving for retirement

After you have adequately funded your emergency fund, it’s time to start saving for retirement. Company-sponsored retirement plans allow you to put pre-tax dollars into a retirement account and companies will often match part of your contribution. The sooner you start saving, the quicker you’ll be able to accumulate enough money to retire.

Many young adults live paycheck to paycheck, but that doesn’t mean that you can’t manage your money, stay out of debt, and start saving for your future. By thinking creatively and employing a somewhat frugal approach, you have the potential to be in great shape financially, meaning you’ll sleep better at night. 

Photo via Pixabay

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