Whether you are still in college or starting your first job, these tips are for you.
Including Gen Z and the youngest section of the Millennial demographic, today’s generation of young adults are faced with the challenge of navigating a complex financial landscape. This is true even for young adults who grew up in great Philly neighborhoods like Chesterbrook and Penn Wynne, which not only have stellar public education systems, but also a lower cost of living compared to other wealthy neighborhoods in America. Privileged or not, it’s all too easy for young people to make mistakes that can result in financial failure. But don’t let that intimidate you. Understanding even the simplest and most fundamental financial principles can set you on the path to financial stability.
Understanding how compound or compounding interest works is at the heart of any great long-term financial strategy. As CNBC’s compound interest guide details, this can apply to savings, loans, credit card payments, or anything that can be affected by interest. It’s basically the interest on a loan or savings account combined with the accumulated interest over time. Applied to savings, this means that the earlier you start, the larger your savings can grow. In terms of loans, this means that the later you settle your payments, the more you’ll have to pay. Whichever you’re dealing with, knowing how to calculate compound interest can allow you to better set your financial priorities and more efficiently reach your goals.
Speaking of setting priorities, knowing how to budget your money is another key to financial stability. There are a variety of budgeting styles and methods that you can adapt depending on your goals, resources, and current financial standing. Whichever you choose, it all boils down to making sure all essential payments are met before you start spending for what can be considered non-essentials. Consistent budgeting also gives you a realistic overview of your finances, allowing you to better allocate money for whatever savings or payments you need.
Nowadays, every banking app will have options for setting up automatic payments to other banks, and service providers. While essentially part of budgeting, automating essential payments gets a special mention because of how it can make personal financial management so much easier. Automated billing frees you up not only from long lines, but also from having to worry about repeated expenses. Why worry when you can automate?
Whether you’re financially stable or in debt, sooner or later you will need to take on a loan. Marcus’ personal loans guide notes how borrowers can use this money for a myriad of purposes. Whether you need to borrow money for a wedding, home renovation, moving, relocation, vacation, or even debt consolidation, it all falls under the purview of personal loans. Whatever you need to accrue loans for, always keep an eye on the annual percentage rate (APR). This rate determines how much of the principal amount you actually owe per year. This means that loans with fixed APRs are better, as they not only simplify payment but also allow you to avoid compounded interest on any payments.
Does your employer offer to match their employees’ contributions to 401k accounts? In the world of finance, this is one of the closest things you can get to receiving free money. Many companies are willing to match 3 to 6% of annual employee salaries as contributions to their nest eggs. If you keep contributing this percentage amount to your 401k, so will your employer, paving your road to an earlier retirement.
Consult the IRS’s guide to tax credits and deductions for individuals to determine which of your expenses can be deducted from the taxes you need to pay. This includes but is not limited to residential energy efficiency credits, health coverage, educational expenses, work-related deductions, certain investments, and many others. The more you can justify certain expenses as tax-deductible, the better off you’ll be after the tax season.
Last but not the least, it always pays to live within your means. However much money you’re making now, spending not just within but below your means will allow you to have a financial buffer for emergencies and other unexpected expenses. The more you can stick to living and spending prudently, the easier it will be to attain or maintain financial stability.
Post solely for the use of mainlinetoday.com By Chloe Miles