Monday, 6 July 2020

When you're just starting to manage money, you might not be thinking about your long-term financial future. However, how you handle money today can have an impact on your financial wellness for many years to come.

With this in mind, here are five essential financial tips to provide some guidance as you start your life-long personal financial journey.

1. Learn to save

You've probably heard it before, and chances are you'll hear it again: Saving money is important. In fact, having even a little savings can improve your financial situation in countless ways.

For example, someday you'll want to get your first apartment or buy your first car. Savings can allow you to make your first and last month's required rent or put a down payment on new wheels. Or, if you're sharing an apartment with a roommate, what would happen if you get laid off or can't work indefinitely? Savings could allow you to pay your rent until you find another job or return to work.

Knowing you need to save money is the easy part. Actually doing it can be challenging. One of the best ways is to have money automatically transferred from your checking to a savings account each pay period or at least once a month. Setting up an automatic transfer is key because you don't have to remember to do it—it's done automatically.

Rest assured, when a need arises, you'll be glad you did. Not to mention that learning to save early can help you become a lifelong saver, which is a very good thing to be.

2. Learn to budget

You've probably heard how important a budget is, too. That's because learning to make and manage a budget can put you in control of your finances, which can help you avoid debt and allow you to save.

Most checking accounts come with online tools that make budgeting easy. You just put in the numbers and the software does the rest. Since most of your expenses are probably electronic—debit card, credit card, or other digital payments—your spending data can be automatically funneled into your software, making tracking expenses and adjusting your budget almost effortless.

A well-planned budget should help you monitor income and expenses so you don't spend more money than you have. Which brings us to tip number three...

3. Be careful with debt

Debt can be easy to get into and very hard to get out of. At your age, debt commonly comes in the form a credit card debt, which can be some of the hardest to manage.

Let's say you run out of money days before your next paycheck but you still need to buy groceries. So, you use your credit card. But what happens when the credit card bill is due? If you don't have enough to pay it off and you just make the minimum payment, interest kicks in and your credit card balance gets bigger. If you need to fall back on your card again next month, you'll have a hefty balance you can't pay off before you know it.

Maintaining your savings and a budget (refer back to those first two tips) can help you avoid getting into debt. First, you could use some of your savings to cover your expenses until you get paid. And, by monitoring spending using your budgeting software, you could see the shortfall coming and make adjustments to your expenses to avoid going into the red.

4. Start building credit

Your credit score is basically a number that reflects how well you manage your money. A good credit score can help you get an apartment, a car, a job, and more. Conversely, a bad score can prevent you from getting an apartment, car, and job. So, keeping your credit score as high as possible is a big deal.

When you're just starting out, you really don't have a credit score, so you need to build one. You can do this by paying your bills on time. If you pay rent, or have regular car or credit card payments, make sure you pay at least the minimum amount required on time each month. Doing this for a few years can help you build a good credit score.

5. Set financial goals early

You might think setting financial goals while you're in college isn't important. But it is. Even if you set small goals—like you want to save $500, for instance—learning how to plan and achieve a goal can be rewarding. It could also teach you good money habits that could last a lifetime.

After all, that's what you're doing now—you're laying the groundwork for your financial future. Starting out smart and strong could put you on the road to long-term success.


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