First off, I am a 24-year-old man. I am not some guy looking back saying, “I should have done this or that.” Second, I am not a financial major, nor am I a CEO of a major company. I am a normal guy, with normal financial situations and a family to support. My advice is from doing my own research and testing the advice I have received. I think this is a great strength, not a weakness, and I also believe we have a lot we can learn from each other, so please leave your advice in the comments column.
Now, let’s get down to business. I have a lot of advice and it is all important. But perhaps the most important is the following: Don’t spend more than you make. Debt is the worst thing around. I know, duh! If it is so obvious, why don’t we only spend what we make? Simply put, life gets in the way. What I am suggesting is to plan for your upcoming expenses and start saving ahead of time. Rather than paying $50 a month on a credit card payment after the purchase, save $50 a month before the purchase until you have enough. You will get the interest from your bank and save the interest you would have been paying on the credit card. A bonus for this approach is you remove the impulse purchase. The more time you think about it, the more likely you are to realize you don’t need it.
Alright, so what about when you have a sudden expense that you must spend money on now, like a car repair? It is important to have emergency savings. Many articles suggest at least six months worth of expenses. That is a great goal, one that I personally am still working on, but remember, anything is better than nothing! If you only have $2,000 saved, you still have $2,000 worth of emergencies saved. If your employer offers it, have a little bit of money automatically deducted and placed into that account so you never realize that you are missing it (if your employer doesn’t offer this, most banks will set up automatic transfers). It is important to keep these savings in an account that offers interest. It is stupid not to take free money, even if it only amounts to only a couple of bucks.
This leads me to my next point: Don’t throw away free money! Did I say free money? That sounds too good to be true, but believe it or not, it is all around us. I have already mentioned the interest, which is a good one. Both my savings and my checking accounts accumulate interest. They are not the best of rates, but, again, free money is free money.
One more source of free money is credit card rewards. I know I have already mentioned that debt is horrible, but let me explain. If you pay it off every month (or every paycheck, as I like to do), you don’t get charged interest but you do get those rewards. Additionally, it is generally considered a safer form of payment because they will cover some unauthorized expenses. Another important source of free money is company sponsored 401(k)s. Whatever amount your company offers to match, take it!
Once again, this leads me into my next point: retirement. It feels like a long time away, I know, but now is the time to start planning. Use that 401(k), but remember the Roth IRA. The best thing about a Roth IRA is that it is money that is already taxed. You won’t get any money now back from taxes, but when you are retired and trying to make that money last, you won’t be giving it up to the government. Many experts suggest saving 10 percent of your income for retirement, but I say save as much as you can.
It is also important to regularly review your finances. Look at what is due, when it is due and what your total debt load is. Work on reducing that debt load, while ensuring that you do not miss a payment. Missing a payment will hurt your credit score (remember to regularly check your credit report and fix any inaccuracies). I also regularly look at what is being spent and how to cut expenses.
The last little bit of advice I will offer in this article is to continue to look for more advice. There is a lot out there, so go find what works for you. Work to get rid of that debt and remember, the good life doesn’t just come through credit cards. You must work for it. Develop your plan, stick to it and be patient! I hope I have helped, even if just a little.