Manage your finances with these simple yet effective tips.
Young people, especially those in their 20s and 30s, usually find the task of managing their money a bit overwhelming. To make this monumental challenge easier, here are some personal management tips every young adult should consider.?
5 Money Management Tips for Young Adults
Start building an emergency fund. According to the results of a survey conducted by financial planning company LearnVest, people in their 20s and 30s are more focused on the bigger picture, such as building a healthy emergency fund. To realize this goal, they should start reviewing their budget and determine how much they can put aside each month for their emergency savings. Consider opening a high-yield savings account and set up a direct deposit from your paycheck to this account to reduce the temptation of spending your money on less important things. To be on the safe side, aim to save at least six months? worth of living expenses in your emergency fund.
Save for retirement. When you start saving for your retirement at an early age, you can expect to build a sizeable nest egg for your senior years. At the very least, put 5% of your gross income into your retirement fund and gradually increase it to 15% to 20% over time, and try to maximize your IRA or 401(k) contributions. Keep in mind that the earlier you save, the bigger your retirement fund will be.
Tackle your debts. People in their 20s and 30s should also prioritize paying for their student loan and credit card debts. If your student loan debts have interest rates below 4%, you may consider paying your other loans or focus on contributing to your other financial goals first. However, if the interest rates go as high as 6% or more, you should definitely make it a priority. To trim the interest rates, consider setting up automatic payments for your federal student loans.
On the other hand, if you are still paying your credit card debt, focus on the card with the highest interest rates and pay the minimum payment required for the other cards.????
Build your credit history. Since having no credit can just be as bad as having bad credit, you need to take on some debt and manage it carefully to earn a good credit score. For best results, avoid maxing out your credit card and always pay your balance in full.
Get insured. Protect yourself from any unforeseen events by getting insured. This alone can help you avoid shelling out thousands of dollars when bad things happen. You should also get into the habit of reassessing your insurance needs from time to time.