Managing finances can be tricky, especially when you’re young. For many people, getting started with financial planning is made more complicated by the plethora of information out there. That’s why it’s a good idea to have an easy-to-follow set of fundamental principles that provide a good foundation for financial health. Whether you’re trying to maintain an exemplary credit score, planning for retirement, or determining how best to repair your credit, these “money musts” can help you get started.
3 “Money Musts” to Jump-Start Your Finances in Your 20s
1. Break the cycle of credit card debt. It’s tempting to hold off on repaying debt until you’re older and bringing in a bigger paycheck. But the fact is, as your salary increases, so do your expenses. Along with that extra money comes a natural progression of increasingly costly expenses: buying a house instead of renting, having a family, or combining finances with a partner. That makes tackling debt early and often a good idea as long as you’re avoiding making big repayments you can’t afford. Budget out a realistic plan and stick to it.
2. Build up those emergency savings. The best way to do this? Set up a direct-deposit from your paycheck into a high-yield savings account. That’ll keep you from spending that money before you get a chance to save it. Stay realistic: Start off by saving one month’s salary. Then build to three months’ worth of pay in your emergency fund. Work your way up from there until you hit the emergency savings sweet spot: six times your monthly take-home pay.
3. It’s never too early to start saving for retirement. As far away as retirement might seem, it’s vital to start putting some of your extra cash into your 401(k). Thanks to compound returns, even small amounts can make a big impact. Once again, it’s important to start slow. Put away a reasonable portion of your paycheck and increase it by 1% every six months until you reach the maximum allowed. If your company participates in an employer match, take full advantage. Not doing so is leaving free money on the table.
3 “Money Musts” To Jump-Start Your Finances in Your 30s
1. You’ve hacked away at that debt? Great. Keep at it. Once you move into your 30s, it’s all about strategically taking down your remaining debts. Focus on the credit card with the highest interest rate and pay the minimum on the others. You might be close to paying off your student loans in your 30s, but if you’re paying higher interest rates (6 percent and up) on other debt, pay off those loans first as soon as you’re financially secure. If your student loan interest rates are low, you can even feel free to concentrate on other financial goals while continuing to pay off the low-interest loans.
2. Don’t forget about the kids. By now, your money management needs might include planning for others besides yourself. This could come in the form of child care costs and college savings for your children. To lessen some of the financial strain of tuition costs and college fees, consider opening a 529 plan. Just make sure you choose wisely—529s sold by investment advisers tend to carry higher fees than the ones made available directly from the state.
3. Take stock of big life events and reassess your insurance needs. View the big milestones in your life as the perfect time to take a second look at whether your insurance needs are being met. For example, securing life insurance may become a priority if there are people in your life who depend on you for financial security.
Following these tips should put you on the path to solid money management. Another huge part of financial health is the state of your credit score. That’s where a credit repair agency like Ovation can really make a difference. Give us a call today so that we can connect you with one of our credit experts for a free consultation.