Graduating from college is an exciting time – no more studying, finding your first real job and of course a nice salary. All this new found time and money can invite bad money habits. Below are some money management tips to get you (yuppies) started on the right track.
1. ‘If you can’t pay for it in cash, you can’t afford it.’
It’s a simple fact. If you don’t have cash for it, you can’t afford it. But, if you are buying items on credit, you are really paying for much more for what you could afford. Credit, however, is NOT always a bad thing as long as your pay your balance off in full each month. Live off what you make. Avoid getting into the habit of living paycheck to paycheck. Learn to budget your money efficiently. Spend only what you currently have on hand, minus your savings.
2. Create Your Budget
Budget your needs and your wants. It is important to prioritize essential expenses (rent, utilities, food, transportation) versus discretionary expenses (movie tickets, new iPhone, pleasure expenses). Chances are if you know where your money should be going each month, you would be a lot less likely to be as frivolous with your spending.
3. Start Investing in Your Future
This goes for anywhere from saving for retirement to furthering your education through an advanced degree or career training. It’s very easy for a young person to put off saving for retirement. They can easily justify not contributing to a retirement fund by saying that there is still a lot of time ahead of them. This is exactly why young people should invest in their retirement – because time is on their advantage. By contributing a small amount now, you will be able to benefit more from growing your long-term investment than contributing at a much later time.
4. Build an Emergency Fund
Planning for unexpected expenses (like job loss or illness) is critical. It is always a good idea to have money saved up for that inevitable event. Many advisers recommend putting away three to six months of your living expenses for such an event.If you are having trouble finding the money for a savings fund, start small. Every small amount adds up and something is always better than nothing.
5. Start a Sideline
There are plenty of ways to make a little extra income on the side. If you have a talent or a special skill, think of a creative way to put it to use. You can always find a use for a little extra cash and there is no time like when you’re young than to put it to use.
Being young is perhaps your greatest weapon when it comes to personal finance. TODAY is the best time to take control of your finances and form habits that will eventually add up to significant strides towards the betterment of your personal finance and life goals.
What advice would you give to young professionals?
photo credit: _MG_3794 Mattie Rana Cadence via photopin (license)