Smart Borrower Center
Tools to help you borrow better
Money management starts with living within your means. It’s one of the most important habits to form, yet also one of the hardest. In our culture of instant gratification, it can be hard to distinguish what you want from what you need. And easy access to credit makes it easy to overextend yourself. As a young single person, you live on your own and make money, but you are still early in your career and are probably still paying off debt from college. Poor choices now can come back to haunt you in the future. Learning money management skills can help you live within your means.
Pay off debt from the past
If you want to live within your means, the first step is to pay off the debt you accrued in the past. You may have student loans and credit card debt. The key to successful money management is to develop a plan of action and stick to it. It is always wise to pay off high interest loans first. Your student loans probably have low interest rates, so they may not be as high a priority to pay off quickly. Plus, you have a variety of options for paying them off.
Choose the plan that works best with your budget and allows you to get out of debt fastest. But remember, student loans are not bad debt. Paying more toward a high-interest credit card is far more important than paying off a student loan. That shows you are shrewd with your money management.
Become a homeowner
A big decision for many young single people is whether to become a homeowner. Keeping in mind your goals for wise money management, decide if it makes more sense to buy a home or pay rent. Be careful to distinguish between wants and needs in this decision. Although you need to have a place to live, it does not have to be a home that you cannot currently afford. Instead, look at how much you pay in rent each month. You may be able to find a condo for a comparable monthly payment. If saving enough for a down payment is a problem, first-time home buyers can often qualify for an FHA loan, which can require as little as a 3 percent down payment. Making a wise decision about homeownership is a step toward responsible money management.
Set goals
A large aspect of money management is setting appropriate goals. You need to know where you want to be financially in both five years from now, and also fifty. That is why it is important to start saving for retirement as soon as you begin your career. Have your employer automatically deduct money from your paycheck. This removes the temptation to spend it on something else. It is important to remember that a fancy new car is a want, but having adequate savings for retirement is a need. It’s smart to always be forward thinking when it comes to money management.
Published on May 24, 2007