Table of Contents
Master Your Money Early
Following are some of the best personal finance tips that young professionals should consider while managing their money.
Congratulations—you got your first real job after college. You earn much more than you used to, and that’s why you’re enjoying this kind of lifestyle that you’re enjoying. It is a time of new beginnings with a lot of opportunities and things to look forward to. But this is also the best time for people to learn good financial behaviour.
Developing good financial habits early in life, during the youth will reap benefits for the rest of your lifetime. Below are the best tips on personal finance for young employees.
1. Make a Budget and Adhere to It
The first main area of the financial success is frugal living; that means living within the limit of your income. List down all sources of your income and list down all your expenses for the last few months.
Finally, divide each spending, and do not be hesitant to categorize the necessary expenses from the unnecessary ones.
Next, develop a realistic budget that will allow you to track where your money is going and help align your spending with your values and priorities.
To budget doesn’t mean to deprive yourself; it’s just having a plan for how your money will be spent or invested during some time period—in this case, a month. Track your budget month by month and make whatever modifications are necessary.
2. Create an Emergency Fund
Of course, life is unpredictable, and this is why it always makes sense to build up some cash for a rainy day. Ideally, you want to build an emergency fund in a high yield savings account with money to cover 3-6 months of bare necessities.
This will cushion you against situations where you’d need to borrow money just to settle certain unfortunate events like losing a job, health bills, your car breaking down, among others. You need to save up money and it does not have to be a whole load of cash, $500 will do.
3. Attack Student Loans With Vengeance
Statistics show that the average college student graduates from college owing over $30,000 in student loans. Just like how paying the minimum amount on the money owed will consume a lot of time in other financial goals.
Pick a debt snowball strategy for rapidly paying off student loans within the first three to five years of your career while saving for retirement (fifth point). This means that once you are able to retire this debt well ahead of time, you will have enough cash going around for the rest of your needs. Our Simple Interest Calculator can help you project your loan payments and plan your repayment strategy.
4. Build a Good Credit History
For the young professional who wants to achieve, say, a car loan or home mortgage goals in the future, building a good credit score and credit history is an important thing to consider. Good credits are very important because in the long run, that would help someone save a lot of money.
Pay the whole balance of the credit cards by its due date each month. If not that, at least keep the balance of credit cards low and try to keep below 30% credit utilization.
Last but not least, you indicated that if possible, you would have liked to have opened a credit card during your college days so you could have started building a good payment record at a younger age.
5. Stop Procrastinating – Contribute Something to Your Retirement Fund Right Now
It seems from the results of this survey that most young professionals think they can always begin saving for retirement. However, time is the only thing which you have on your side. What really makes that better is the fact that even small chunks of money you save every month in your 20s can snowball through the magic of compounding.
Maximize the employer’s contribution in 401k or any other retirement savings schemes your employer offers.
Below certain income levels, one should also consider opening a Roth IRA investment account. Always save between 10-15% of your pay towards retirement; your 65-year-old self will never regret this.
6. Picking Out Your Health Insurance and Disability Plan is Not Something to be Taken Lightly
Employer benefits packages at the first well-paying job can be quite puzzling to most people. Therefore, when choosing a health plan, what you want to balance is the monthly premium against out-of-pocket expenses through deductibles and copayments, the network of providers, prescription drug coverage, and annual limits on out-of-pocket spending to ensure value from the plan based on health needs and overall risk.
You should also get relatively affordable long-term and short disability insurance which pays out in case one cannot work because of sickness or injury.
7. Purchase Renter’s Insurance
Renter’s insurance can cover all of your contents and personal property against theft, fire, flood, and other disasters at a very low cost. The coverage also provides for temporary housing if you are unable to live in your house or apartment.
For a young renter, $30,000 to $50,000 worth of coverage is quite a bit cheaper at less than $15 a month, with the value most certainly there.
Following such personal finance principles right from the beginning of the working career will put one on track for financial freedom. In other words, small, intelligent money decisions made consistently at the early stages yield enormous returns in the later stages.
Keep your eyes on the prize: take charge of your money story now to have financial freedom and live the life you deserve.
Create budget in icici bank
