Graduating from college can be a very exciting time. You find yourself with your first real job, the freedom that comes with no more studying, and of course a nice paycheck. All of this new found time and money can invite bad habits though.
Many new graduates rush out and make a new purchase such as a car because they think that they can afford it. Before making this kind of financial mistake, read the below pointers meant for young professionals.
1. If you can’t pay for it in cash…
You’ve probably heard it before, but if you’re not living these words you should start. If you can’t pay for it in cash, then you probably can’t afford it. There are a few exceptions to this but for the most part, if you don’t have cash for it you can’t afford it.
If you are buying items on credit, you are really paying much more for said item as you are also being charged interest and fees. If there is an item that you would like to purchase, try putting it off for a week and see if you still want it as much as you originally did.
You may find that a lot of the purchases you make are on impulse. Credit however is not always a bad thing as long as you pay your balance off in full each month. This allows you to build up a good credit score which you will most certainly need when it comes time to buy your first home.
2. Budget your Needs and Wants
Chances are if you knew where your money was going each month, you would be a lot less likely to be as frivolous with your spending. It just so happens that this is the first step in any budgeting process.
Document your spending in order to determine just where all of your money goes each month. Using this information, you can then determine just how much of your money you would like to budget for certain areas of spending.
3. Build Your Nest Egg
It is extremely easy for a young person to put off saving for retirement. They can easily justify not contributing to a retirement fund by saying that their whole lives are ahead of them.
This is the point that many advisors make when trying to get young people to invest in their retirement. By contributing a small amount now, you will ultimately invest less as the time value of money is an extremely powerful tool when it comes to investing.
4. Save for a Rainy Day
You never know when misfortune is going to strike. It is always a good idea to have money saved up for that inevitable event. If not, it could be grounds for a potential financial disaster.
If you are having trouble finding the money for a savings fund, start small. Every small amount adds up and something is always better than nothing.
5. Start a side hustle
There are plenty of ways to make a little extra cash on the side. Especially if you have a talent, think of a creative way to put it to use. You can always find a use for a little extra cash and there is no time like when you’re young than to put it to use.
Being young is perhaps your greatest weapon when it comes to personal finance. There is no time better than now to take control of your finances and form habits that will eventually add up to significant strides towards the betterment of your personal finance and life goals.
What advice would you give to young professionals?