With college graduation upon us and high school approaching, there is a lot of talk on becoming an adult and what all that entails. For most it may moving on to the next chapter of their lives whether it’s continuing education further or starting a career. It also makes you think about financial responsibly as well, as that is a large part as you move out on your own and eventually build a family. Not every path is the same as well as financial situation and should be treated as such, but there are some core principles that can be followed in becoming successful in your own personal finance. No matter if you are just beginning your career or are approaching retirement, the same mindset should be continuing to reduce unnecessary expenses so you can free up extra money to give yourself a cushion, not only today to avoid living paycheck to paycheck, but in retirement to be able to afford to life experiences.
Build an Emergency Fund
You never know what life will throw at you so it’s always a good idea to give yourself a cushion so if a large unexpected charge were to come up, you wouldn’t have to put on a credit card and go into debt. If money is tight now and you have a huge expense, paying a little each month until it’s gone will lead to interest being wasted, if you can even pay off in a reasonable time. By putting a few months’ worth of expenses into an account, you can give yourself a much-needed cushion.
Try a Budget
To say that most people do not follow a budget is surprising, but that doesn’t mean that you should go with the norm if it will help you otherwise. If you find yourself having more money going out compared to coming in, it’s a good idea to find track your expenses by looking at last month’s credit card or debit statement so you can see what you’re currently spending on bills, food, gas, entertainment. From there start to allocate available funds to each area and try to stick to that. The hope is that you can start to watch purchases a little more and stick to your budget.
Beware of Credit Cards
There are plenty of reason to use a credit card, in fact, it can be argued that they can be used for every purchase, but there is also a great risk involved. At least with a debit card, you can spend what you can afford that’s in your bank account, but with a credit card you can keep charging until you hit your limit, and then the bill comes in and you’re scrambling. By charging what you can afford and avoiding carrying over a balance, you can take advantage of the credit card rewards where you can earn points or cashback on the purchases you were going to make anyways.
Save for Retirement
You always hear “it’s never too late” to try things, but unfortunately there comes a time when you have just waited too long and you will not have not only what your retirement goal was, but enough to live off. The earlier you can start saving the better, so it has more chance to grow over time, so you can maximize your income when you really need it most. Take a look at work to make sure you’re taking full advantage of any company matching retirement contributions to ensure you’re not leaving any free money on the table. Just think about if you had a few thousand extra every year from your work that adds up and grows over a few decades.
Watch Your Credit Score
If you have applied for a mortgage, car loan, or a credit card, you know that your credit score is a large factor in not only your approval, but also the interest rate that you receive. In order to take advantage of the best rate on the market, you need a great credit score, so as the rates increase, so do your monthly payments, so why pay any more interest than you need to and take care of your credit. By pulling your credit report at least once a year you can ensure that all accounts are accurate and up to date. Although you will not get a credit score when pulling your report for free from the major credit bureaus, you can see your score on monthly credit card statements and you can watch make sure your score continues to climb.