At one time or another we’ve all been there, drowning it debt or simply not being able to make ends meet. When you are saving money and are educated on smart spending you’ll be out of debt in no time. But, you will need to put forth the effort to regaining control of your bank account and save for retirement.
If your parents’ sound financial advice didn’t resonate with you as a young adult, or if you simply chose to focus elsewhere, you may be finding yourself under financial duress now that you’re a working adult. The turbulent nature of our economy and the restrictive salary of your first job make budgeting seem far-fetched. Unless you want to go back to your college days of microwave meals and bus passes, here are a few tips to get your finances in order.
Work with percentages
If you’re ready to get aggressive with your savings and start building up your nest egg, move forward by using the 50:30:20 Rule in which 50 percent of your monthly salary goes towards your necessities (mortgage/rent, food, monthly bills), 30 percent for wants (entertainment, shopping and travel) and 20 percent for savings. Determine these percentages in advance based on your monthly salary and upon getting paid so you know the exact breakdown of your monthly budget.
Avoid spending on luxury
Luxury items such as cars, clothing, jewelry and other accessories always provide that instant gratification. They may even be useful for selling a professional image at work. Consequently they are a step in the wrong direction if you’re serious about your savings goals, so maintain self-control and spend wisely. Do your research by finding used cars on Kelley Blue Book according to make, model and mileage for customized results, and shop knowing a vehicle’s fair value. For clothing and trendy items, stick to your budget of 30 percent for each month’s “wants” and weigh each swipe of your credit card according to what it means for the rest of your month’s purchases.
Start saving early
Retirement seems irrelevant to a 20-something just entering the workforce, but putting away even a small amount now can protect you from making big monthly payments while juggling financial responsibilities like mortgage payments and private school tuition costs down the road. If you started saving just $5,000 at age 25, you could potentially reach $1 million by age 70—including 6 percent compound average returns. That’s just a little over $400 a month! Starting at age 45 will require $18,000 in savings to produce this same return.
Maximize interest rates on bank accounts, not credit cards
In some cases, debt is unavoidable, and even necessary. The Chronicle of Higher Education recently reported that 60 percent of students borrow every year to cover the cost of college. According to studies by the Federal Reserve, the average credit card debt is $15,279, and the average mortgage debt is $149,456.
Look for high interest rates when it comes to savings accounts, since this reflects the amount you’ll earn simply by letting your money sit in the bank. Make conscientious decisions about where your money goes, and be forward thinking about how each expense effects your future financial situation. Proper planning at a young age will pay off as you age, and you’ll have your smart thinking and small sacrifices to thank in the future!
Whenever possible look for places to earn extra income. This could be by clipping printable coupons, taking online surveys with sites like Inbox Dollars, Ipsos, MySurvey, and National Consumer Panel are just a few to get you started!
In addition, you can clean your home, get rid of the clutter and get organized by selling items on sites that let you sell items for free. There’s TONS of Facebook groups in your neighborhood for this as well as Craigslist and Bukoo.