If you are a recent college graduate and are newly employed, this might be the first time that you are totally in control of your finances. This can be an intimidating time in your life with bills and rent or mortgage payments. But planning ahead and sticking to your guns can help you transition smoothly from being a broke twenty-something to a financially savvy young adult.
Debt basics
One of the best things to figure out early is the difference between smart debt and dumb debt. An example of dumb debt is spending money on credit cards by purchasing things you don’t need and can’t afford. It can be tempting to try to keep up with the trendy images that you see of recent college graduates, but in reality you’re simply putting off the inevitable and making your debt worse.
Smart debt is something that helps create value, such as a mortgage or student loans. This type of debt can further you financially and help you buy something that gains in value, as long as the loans are properly paid and paid on time. Buying a house can help you build equity, which you can then use for other major purchases or tuition money for a graduate degree.
With any loan or credit card debt, it is important to devise a plan to pay it off. Form a budget and stick to it so that you can enjoy your income throughout your life instead of constantly living paycheck-to-paycheck.
Paying bills
If this is your first time living on your own, you might feel a little bit overwhelmed by the inflow of bills. You are now probably paying for electricity, phone, cable, internet and water services. One thing that can help keep you afloat is to start a calendar system. Mark the days that bills are due each month, and make a commitment to pay them on time. Paying bills on time helps your credit score, and having a good score can save you thousands of dollars over your lifetime. You can also opt to have your bills automatically drafted from your account each month, so you might not even need to deal with the paper statements.
Save and invest
This is also a good time in your life to start saving and investing money, particularly a retirement account. If you are planning a family, you consider saving for your children’s college educations. Check out different investment accounts and keep your eye on the stock market. You also might want to talk to a professional at your bank about CDs and other low-risk savings accounts.
Remember, you don’t have to be an economist to make wise decisions about your finances. Your most important strategies for success are to pay down your debt, save and make smart purchases.
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