Now is the time to get debt under control and start saving
Many young people begin their prime earning years under a pile of debt that usually includes college loans and credit card bills—getting out from under it can seem like an impossible task. But if no one is depending on you for financial support, your path to financial security should be short and smooth.
The key is to start the journey now. Putting off the basics—creating a budget, reducing debt, saving money, planning for retirement—only makes things more difficult and expensive in the future.
Begin now by following these steps to financial control:
Step 1: Create a budget
Knowing what comes in and out of your bank account each month and where it goes is crucial to knowing how to best allocate your money. Then, any extra money you can find in your budget should be applied toward eliminating any debt you have.
Step 2: Get debt under control
Getting credit card debt under control should be your first priority because it is so expensive. Plus, making regular payments and reducing debt is a good way to improve your credit score.
Paying off college loans is important too, but they are a lower priority because they typically have lower interest rates.
Step 3: Start saving
Get into the savings habit early. You have time on your side, so the power of compounding will really pay off one day. Just $25 a week set aside over 15 years builds a nest egg of more than $31,000, assuming a 6% annual return.
Preparing for retirement may not be top of mind for you now, but it should be. The sooner you start saving, the more the miracle of compound interest will work in your favor, and the more enjoyable your retirement will be.
Step 4: Protect what you have
How would you feel if a fire damaged your home and you had to pay to replace everything in it? Or if you became ill and could no longer work but had no way to replace your income?
Accidents, illness, and disability can have devastating consequences. But the good news is, you can protect yourself by getting insurance. Must-have types of insurance are:
- Car insurance
- Health insurance
- Disability insurance
- Home or renters
Taking these steps will put you on a path to financial security and help you take charge of your financial future.
Next, get information about smart financial planning when you have a family to care for.