It seems that the younger we are, the less sense we have when it comes to finances, among other things. However, the decade leading up to your 30 birthday can be a crucial time–with it being the ideal period for establishing credit, developing spending habits and saving money.
People often say that your teens and twenties are for making mistakes, but when it comes to finances by the time you turn 30 there is very little room for mistakes to be made without there being long-term consequences.
1.Pay as you spend. Whenever possible, make a payment on your credit card each time you make a purchase. This will help you to maintain a zero balance and avoid interest charges.
2. Keep credit card balances low. If you are unable to keep a zero balance on your credit cards, at least be sure to maintain low balances. As a rule of thumb, balances should stay below 30% of the credit line, but the lower the better.
3. Never miss a payment–ever. As a young adult, you’re probably busy doing “young adult stuff”, however don’t forget to make your credit card payments on time. If your credit card payment is 30 days late or more, your creditor will most likely report it to the credit bureaus; and get this–it’ll be stuck on your credit report for the next 7 years! That’s a huge price to pay for such a small mistake. If you are less than 30 days late making the payment, the late payment won’t be reported to the bureaus, however you’ll still be subject to late fees from the creditor.
4. Keep older accounts open. As long as they are in good standing (no late payments, etc.), leave older credit accounts open. This will help with your Age of Open Accounts average, which is a factor in your overall FICO score.
5. It takes credit to get credit. If you are one of those people who are opposed to using credit, you may not be aware of just how important credit is. Making bigger purchases (houses, cars, etc.), are next to impossible if you haven’t already established a few credit lines.
6. Mix it up. Types of credit are an important aspect of your credit score and analysis. Potential creditors like to see a mix of credit lines. This could include credit cards, a mortgage, car loans, student loans, personal loans, etc. At the same time, don’t go out and open new credit lines just for the sake of mixing it up.
7. Set savings goals. Saving money is easier when you have a goal set before you. After you’ve reached your initial goal, aim for a higher goal.
8. Establish separate savings accounts. As a rule of thumb, you should have one account labeled as your emergency fund, one account for short-term savings, and one for long-term savings.
9. Build up your emergency fund. Your emergency fund should maintain a minimum of $1000. However, you should try to aim to save up at least six months worth of expenses in it.
10. Don’t touch it. You should not be withdrawing money from your saving account(s) on a regular basis. In fact, most banks charge fees for withdrawing from your saving account(s) a certain number of times within a certain time span.
11. Collect more interest. Get paid to save money by putting your money in high-interest savings accounts! Keep in mind that these types of savings account usually have steeper requirements such as a balance minimum and specific withdrawal periods.
12. Create a budget. Sit down and write out all of your recurring expenses, as well as your source(s) of income. Make sure that you assign every dollar you make to a category within your budget, don’t leave any money unaccounted for.
13. Stick to it. Creating a budget is easy; it is sticking to the budget that most people find to be challenging. Sticking to your budget allows you to stay in control of your finances and has even been said to help reduce stress associated with money problems.
14. Re-evaluate your budget every six months. Circumstances change, whether it be in the form of accruing an additional bill or receiving a raise. Either way, you should re-evaluate your budget every six months in order to make changes and keep it updated.
15. Give yourself an allowance. Be sure that you include an allowance in your budget. This allows you to have a little wiggle room in terms of spending money on yourself without over-doing it.
16. Live within your means. Ditch unnecessary “luxuries” such as designer bags, cable or even your daily trip to Starbucks until you can easily afford them.
17. Keep track of your spending. Create a document or spreadsheet to keep track of your spending habits. Every single dollar should be accounted for.
18. Evaluate your spending. Take a look at your spending habits and make note of any obvious trends. Afterwards, be sure to evaluate your budget and make any changes that you feel are necessary.
19. Learn to say “no”. Whether it is directed towards yourself or other people, learning to say “no” when it comes to spending money outside of your allotted expenses is a necessary part of managing your money effectively. Saying “no” to your friends when they ask to borrow money may a difficult decision to make, but remember that your financial future is hanging in the balance. Furthermore, the more you say “yes” to people when it comes to money, the more they begin to depend on your generosity.
20. Use the envelope system. Some people tend to spend less money when the use cash instead of cards. The envelope system works by placing cash in labeled envelopes that correspond with your various budget categories.
21. Take advantage of discounts and specials. Try your best to avoid paying full price for anything you come across. You can do this by using coupons, shopping store specials and buying clearance items and secondhand goods.
22. Negotiate interest rates. Try asking your creditors for an interest rate reduction. It doesn’t hurt to ask, and the worse that could happen is for them to say no.
23. Make multiple monthly payments. Instead of making one minimum monthly payment, make multiple payments in order to pay down your debt faster.
24. Pay down principle before interest. Whenever you make payments over the monthly minimum payment, be sure to request that the extra payment(s), be applied to the principle rather than the interest. This helps to pay down the principle balance which in turn also lowers the interest.
25. Give yourself a deadline. Decide what debt you’d like to pay off and set goals for when you would like them to be paid off. This will motivate you and help you to pay off debt in a timely manner.
26. Celebrate victories–both big and small. Whether you’ve paid off a credit card or a car, be sure to celebrate each time you eliminate a debt. This gives you something to look forward to and ultimately encourages you to tackle even more debt.
27. Seek advise from a professional. If you are new to the investment game, consult with an investment professional before making any moves. Relying on your own knowledge when you are a newbie could ultimately land you in big financial trouble.
28. Don’t put all of your eggs in one basket. You’ve probably heard many financial professionals talk about the importance of have a diversified investment portfolio, and it is absolutely true. Invest in a variety of stocks and sectors–that way you aren’t relying on just one source to secure a return on your investment.
29. Set your emotions aside. Investing is not for the weak. If you want to be successful in the investment world, it is best that you set your emotions aside. This ensures that you don’t make silly (and costly), mistakes based on excitement or fear.
30. Know when to pull out. Often times, people tend to get in over their heads when it comes to investing. They get so wrapped up in the process, that they forget the ultimate goal which is to make money in the long-run. Monitor your stocks, study any obvious trends, and pull out when you feel it is necessary.
Do you have any other important money tips pertaining to the categories listed above? Share them in the comment section below!