Financial Advice for Twenty-Somethings
Today’s twenty-somethings face a number of daunting challenges as they embark on the road to financial independence. In addition to a slumping economy and a shrinking job market, record levels of credit card debt and substantial school loans are forcing recent college graduates to begin adulthood in the red. If you fall into this demographic, then it is crucial that you take the following steps to prevent an inauspicious start from adversely affecting your financial future for years to come.
- Pay yourself first: This age-old axiom holds as true in the modern era as it did when practiced by such titans of business and industry as Andrew Carnegie, John D. Rockefeller, and J. Pierpont Morgan in the 19th century. The rule of thumb is to save or invest at least 10 percent of every paycheck; however, you may adjust this number up or (very slightly) down according to your budgetary requirements.
- Refrain from accruing credit card debt: Since most credit card companies charge in excess of 13 percent interest, it can take many years of minimum payments to erase even a relatively modest balance of $1,000. To avoid wasting money on these exorbitant interest rates, pay off your entire credit card balance every month.
- Be a prudent money manager: Living on an entry-level salary while paying down debts and making regular contributions to savings or investment accounts requires that you keep a sharp eye on all expenditures. One of the most effective ways to control your money is to comparison shop prior to making purchases on both big- and small-ticket items. The price differences from store to store or site to site can be substantial, and may add up to significant amounts over time.
- Maintain a stellar credit rating: Your ability to secure favorable terms on future home and auto loans hinges on having a fantastic credit rating. In addition to meeting your obligations in a timely manner, we recommend that you check your credit rating at least once a year and immediately dispute any inaccuracies you discover.
- Carry adequate medical insurance: It is estimated that more than 60 percent of all bankruptcies in the U.S. stem from unpaid medical bills, so obtaining good coverage is a smart hedge against the unexpected. Though it might seem counter-intuitive to spend money on insurance policies when you’re young and healthy, it’s better to pay monthly premiums than to risk insurmountable debt.
Good spending and savings habits are the groundwork upon which long-term financial security is built. The earlier these habits are developed the better your outlook for the future, so keep the above pointers in mind as you navigate your way through post-college independence.