5 Personal Finance Tips For The Young Professional
All Financial advice only becomes of use if it is relevant to your unique situation. The right move for someone else may be completely wrong for you as your decisions may be inappropriate for them. Finances are much more complicated now than years ago and this past few years in the economy have not made it any easier to establish a financial foundation. Regardless of age, 30’s or 50’s, there is always room for improvement in your finances.
The most significant aspect to financial freedom is education. Gaining an understanding of basic financial concepts early on is key. Learning about debt, interest, and credit and how they all intertwine will provide for a very sound basis to grow in your financial maturity. The following are important lessons that can be helpful to anyone.
- Begin Saving Now – Compounding. This” phenomenon” can really be magical once you have a grasp on how it actually works. Did you know if you began the month with $.01 and compounded it for 30 days you would have over $5 million dollars at the end of the month? Here is an example.
Time is a powerful tool. Take advantage of it when you are young to see a great return in your retirement years.
- Utilize Debt Properly – Credit is another tool that if applied properly can be very useful in achieving goals. Credit can be quite dangerous and put you quickly into a one step forward, two steps back scenario if it begins to accrue interest over and above what the minimum payments pay down. Use credit cautiously and be sure it is for your benefit in the long term, such as a home mortgage loan.
- Set Realistic Goals – Knowing that you WANT to be financially responsible is simply not enough. Establishing a list of financial goals and clearly defining the future will make the process of budgeting much easier. Again, each individual’s or family’s goals are unique but the end result is reaching a set clear cut objectives. A short list of goals:
- Creating a relief or emergency fund
- Paying off outstanding debt
- Purchasing a home
- Creating a college fund for children
- Stick To A Budget – Managing your money appropriately is critical regardless of the current economic situation and especially important during hard times. Creating a budget that is simple, yet effective because the more complex a budget is the less likely one is to adhere to the plan. You can view an example of a budget template
- Insurance – An often overlooked portion of a young professional’s review of finances, but extremely important. Allocating monies to purchase health insurance may seem unnecessary as a young and healthy adult. However, without insurance coverage an unexpected visit to the hospital emergency room can easily surpass $7,500 just for basic evaluation and treatment! An out of pocket expense such as this can be quite destructive and set one back tremendously who is working towards a debt free goal. Purchasing health insurance will provide peace of mind in having concerns when ill, or confronted with any other health surprises.
The simple truth of the matter is that wealth is built on strict discipline and hard work. Engaging in a smart lifestyle and practicing even smarter behaviors in money management will yield success!