The Money Management Tips Essential For New Grads
Making the jump into the real world is exciting. You’re pumped; you’re psyched, and hopefully, you’re that much richer after finally getting that “real” job. You’ve never done this before, though. And, like all beginners, you’re susceptible to making mistakes, especially when it comes to money.
Establishing good money habits while you’re young is one of the biggest long-term favours you can do for yourself. These basic money management tips will help you get your financial life started out on the right foot.
Track Spending, Not Earnings
It’s a habit that few people really desire to enforce, never mind actually do. Let’s just be real about this: You’re more likely to be tempted to check your Instagram timeline than to spend an hour crunching numbers.
Tracking your spending, if only for a month, is a simple practice that can have a big reward. Before you attempt to grasp alternative ways to make money, you must comprehend all of the ways you spend. Though most people know exactly how much comes in, it’s when calculating how much goes out that things can get a bit hazy. I’m not just referring to how much you spent on clothes and coffees this week, but rather costs that are a bit more difficult to calculate. For example, a good understanding of interest expenses on loans and their compounding rates is a good first step.
Don’t give in to the plastic devil
Credit cards are G-d’s gift to young people! It’s only enjoyable, though, if you know how to use it correctly. Using (or rather, abusing) a credit card is the easiest way to end up drowning in debt.
Credit cards do have some benefits. They give you a credit score. Your credit score is what lenders use to determine whether to lend you money when you apply for a mortgage on a house or a loan on a car for example. Having a credit card builds your score and reflects your ability to handle and manage debt – provided you make the required payments on time.
Paying your outstanding balance every month is the best way to manage your credit card, but you can’t do that if you’ve treated your credit like a special gift-card that’s magically accepted at every bar, mall and online store. Make purchases with your credit card that you know you can account for in your bank account and you’ll protect yourself from endless debt.
Making an Effort to Save
When you’re in your 20s, it’s hard to find the balance between living in the moment and planning for the future. Old habits die hard, but one way or another, you will need to learn to save money. Rather than making the mistake of having intentions to save throughout the month and the money simply not being there, automate savings through payroll deductions or automatic transfers of at least 10 percent of your income. Consider it your “freedom fund.” Having money set aside for emergencies is key to avoiding financial disaster.
Living well takes sacrifice and discipline — but the biggest long-term favor you can do for yourself is to establish good money management habits. Learn to pay off debts and to prioritize building your savings account. You’ll have more money in the future to spend on things that matter more.