While more states are now requiring high schools to teach financial literacy, chances are, if you’ve already graduated, you might not have taken such a class. Having a solid understanding of finance is crucial to ensuring that you can meet your financial goals and live your best life. Here are some helpful tips to get you started on the road to financial security.
If you didn’t take classes in finance or economics, it is time to educate yourself. Consider taking a financial literacy course (many of which are free), reading financial books, newspapers or magazines, or learning about a new financial subject every day by doing some online research. You may want to start by learning how to do your own taxes instead of paying someone to do them for you.
As a young adult, it can be tempting to just buy whatever you want, put it on a credit card and worry about paying for it later. But this can end up putting you in serious debt and damaging your credit for years to come. And without good credit, you’ll have difficulty buying a house or car or leading the life you want to live. Practice self-control and don’t buy things you can’t afford. If you get a credit card, try to always pay the full balance each month (this can actually build credit). Valley offers a Visa College Real Rewards card which has a special introductory 0.00% APR for the first six billing cycles and lets you earn rewards. A debit card can also be a great option as it takes the money directly out of your checking account as you use it, so you won’t spend more than you have or pay interest.
Create a Budget
Create a budget that details out all your income and expenses side by side so you can see exactly where all your money is going and make any necessary adjustments to meet your financial goals. One popular way to budget is the 50/30/20 framework in which you aim to spend:
- 50% of after-tax income on essential costs (rent, food, car payments, etc.)
- 30% on expenses that may not be essential but are nice to have (streaming plans, dining out, a gym membership)
- and 20% for savings (emergency fund, retirement, saving for a long-term goal)
Build an Emergency Fund
Are you financially prepared if you were to suddenly lose your job, total your car, or get seriously injured? An emergency fund can help keep you afloat when you suddenly find yourself in a jam. Most experts recommend saving enough money to cover six months’ worth of expenses. While this may seem like a lot, it’s worth doing for peace of mind. Put aside a little money each month for your emergency fund and put it in a separate bank account so you aren’t tempted to use it before you need it.
Get Health Insurance
If you think health insurance premiums are expensive, wait until you see how much you are charged for an emergency room or hospital visit without insurance. Even if you are young and healthy, you never know when you could get sick or injured, and medical bills can wreak havoc with your financial future. If you’re under 26, you may want to stay on your parents’ insurance for as long as you can. Otherwise, you can often get health insurance through your employer. If you need to buy insurance on your own, investigate the plans offered by Healthcare.gov.
Plan For the Future
Finally, while retirement may seem like a long way off, the earlier you start saving for retirement, the better. Retirement accounts use compound interest, which means a smaller principal investment can grow exponentially over time. If your job offers a 401K, try to contribute as much as you can each month and take advantage of any employer match programs. If you are self-employed or your company doesn’t offer a 401K, consider opening an IRA. Your future self will thank you!
Get Help When You Need It
Finally, find a trusted financial partner who can provide you with the financial services and advice you need to succeed throughout all stages of your life. At Valley, we can provide you with the financing you may need, financial planning services, and the advice and guidance to help you every step of the way. Visit Valley.com to learn more or contact us.