Whether you’re just graduating college or high school, or just want to take control of your money, getting started on your financial journey is incredibly important. After all, if you save and invest wisely in your younger years, you can set yourself up for financial success in the long term. Unfortunately, though, proper financial education is not taught in schools. That’s why we’ve put together a list of the top 10 personal finance tips to get your financial journey started off on the right foot.
Refinance High-Interest Student Loans
If you’ve just graduated college, you should take a look at the interest rates you’re paying on your student loans. If you or your cosigner didn’t have great credit when you took out your student loans, chances are that you don’t have a very good rate. While you’re looking at your existing student loans, get some rate quotes from some reputable banks that specialize in student loan refinances (they’ll typically give you better rates than traditional banks). If you can shave a percent or two (maybe even more) off of your existing loans, go through with the refinance. This alone can save you tens of thousands of dollars over the term of your loan!
Build a Great Credit Score
Having a solid credit score can save you tens, sometimes hundreds of thousands of dollars in interest over the course of your lifetime. This is because the interest rate you are charged for loans is based on your credit score. Those with lower credit scores will be charged higher interest rates because they are seen as risky borrowers. Whereas those with high credit scores are perceived as less risky, so they are charged lower interest rates. Building a great credit score takes a bit of time and planning. Building credit isn’t difficult by any means, but it can be rather tedious toward the beginning. If you want to learn more about building your credit score, we’ve put together an in-depth guide that covers everything you need to know here.
Start Saving for Retirement
As we mentioned before, it’s incredibly important to begin saving and investing in your younger years. This is because the earlier you start saving, the longer your money can take advantage of compound interest. Compound interest is one of the most powerful concepts in finance, and can make ordinary folks into millionaires by the time they retire.Don’t know how to start saving for retirement? Make sure you take advantage of your employer-sponsored 401(k) plan (if offered), and open up either a Traditional or Roth IRA. These vehicles allow you to save for retirement and give you tax breaks in the meantime.
Create a Budget (And Stick to it)
Once you’re working and making some money for yourself, it’s easy to lose track of where you’re spending your money and what it’s being spent on. Developing (and sticking to) a budget can help out with this in a tremendous way. When developing your budget, you will take a look at all of your income and expenses, and allot a given amount of money to each expense category. Throughout the month, you should take inventory of where you spent your money, and whether or not you are staying below your budget. If you’re not on the right track, then it’s time to reign things in!
Look for Areas Where You Can Cut Back
Looking for places to cut back on expenses goes hand-in-hand with budgeting. When you develop your budget, you may be shocked when you find out where your money is actually going. Oftentimes, folks can spend hundreds of dollars per month on things like restaurants and bars and not even notice. If you find an area where you’re overspending, whether that’s dining, rent, your car, or anywhere else, figuring out how to cut back will put a substantial amount of money back in your pocket each month. For instance, if you’re overspending on housing, consider downsizing, or getting a roommate!
Define Your Financial Goals
One of the most important parts of your financial journey is defining your goals. When times get tough, you need to have something that will help keep you pressing forward. Without having a goal in mind, it will be easy to give up when things aren’t going your way. When you’re developing your goals, keep in mind that they can be anything, whether that’s owning the biggest house in your neighborhood, or just retiring a couple of years early. They just need to be something that will make you happy and that’s actually worth working toward!
Start a Side Hustle
Increasing your income, and broadening your skillset is pivotal when starting off on your financial journey. Picking up a side hustle can help you do both of these things. A side hustle will help you generate additional income, and add valuable skills to your repertoire. Additionally, you can take advantage of all of the tax benefits of owning your own business!
Live Below Your Means
This one is fairly self-explanatory, and easy to comprehend, however, it’s something that most people just don’t do. Living below your means is simply spending less money than you earn each month, and saving the difference. Unfortunately for most, they instead live above their means and go into credit card debt to afford things like luxury clothing, expensive vacations, and vehicles they can’t afford. Following this one tip will put you in a substantially better financial place than most people out there!
Build an Emergency Fund
An emergency fund sounds exactly as the name would suggest. It’s a pool of money set aside for when things go awry. Having an emergency fund is pivotal because it can really get you out of a pinch. Those without emergency funds usually have to rely on expensive means of borrowing, such as personal loans, credit cards, and even the dreaded payday loan. These types of loans force people to pay exorbitant amounts of interest, which prevents them from saving any money. So if you don’t already have an emergency fund, you should consider starting one today!
Take Some Time to Learn About Personal Finance
The topic of personal finance is a seemingly never ending ocean of information. Taking the time to read some blogs (like this one), books, or listen to podcasts can really improve your financial life in a major way. At the end of the day, knowledge is power, so make sure you learn as much as you can!
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