A lot of exciting events take place between the ages of 18 and 30. You may start college, begin your first job, get married, and purchase your first home. While this age range brings many rites of passage, it can also be fraught with financial pitfalls if you aren’t careful with your money. Here are some financial tips to keep in mind as you travel from adolescence to adulthood.
- Get a job. You may think that you won’t have time for a job once you start college classes, but it really is doable for the majority of students. Work weekends or nights, or even just one day a week. This will help build your resume and also bring in a little income. If you don’t intend on going to college or you aren’t starting classes right away, take the plunge into full-time employment. Forty hours a week may seem daunting right out of high school, but if you can find this type of work, jump on it. The skills and work ethic you develop will be invaluable as you start to carve out what you want your career path to look like.
- Live with your parents while you still can. While living on your own is an important rite of passage for any young adult, consider delaying your move in order to build your savings. This is probably the last time in your life where you can live rent-free, have your food provided (and possibly cooked!) for you, and not have any other bills like utilities or internet service to pay. Even if you are only working part-time, you can save nearly all of your paycheck since your necessities are covered. After a year or two of saving nearly everything you make, you will have a very nice cushion of savings for emergencies or for the first month’s rent and security deposit on your first apartment.
- Beware of credit cards. Sure, having a credit card for emergencies is a must-have, especially if attending college out of state or if you are living on your own. However, emergencies should be the only thing for which you use it. A general rule of thumb is to never put more on your credit card than you can afford to pay off in-full at the end of the month. Interest can add up fast if you carry a balance, which means you could be paying for that dinner you had last night for several months. Try to always use a debit card or cash so you have a realistic sense of what you can afford to spend.
- Enroll in a 401(k) plan immediately. One of the first things I learned in business school, and quite possibly the only thing I remember, was to enroll in a 401(k) plan as soon as possible. Most companies offer some sort of voluntary savings plan and you should sign up for one as soon as you are hired. If your company offers any sort of match on your contributions, make sure you take advantage of every penny. Contribute the maximum amount that they match or more if you can afford to do so. An employer match is essentially free money towards your retirement, so seize this opportunity to build your savings.
- Start paying down student loan debt. If there is one dark cloud looming over this age group, it’s the reality of hefty student loan debt. Build these payments into your budget from day one. Paying down, and eventually paying off, this debt should be a top priority. It can seem intimidating, but putting it off will only make it more painful in the future. If you can afford it, consider paying a little more than the minimum payment each month to pay off the debt faster.
- Spend your money on a down payment, not a wedding. According to a recent study, the average cost of a wedding in 2012 was a startling $28,427. Instead of using that money on a one-day party, just think of how far that cash would go as a down payment on a house. While your wedding may be the most important event in your life thus far, owning a home is a significant investment and far more deserving of the expenditure.
- Negotiate your salary. In your late twenties or early thirties, you may contemplate changing jobs or moving up within your current company. If you are fortunate enough to be offered a new job or a promotion, do your research before accepting an offer. Find out what the average salary is for your job title, industry, and geographical area. Use this data, combined with your skills and experience, to ask for your ideal salary. It’s misleading advice to say “never take the first offer,” but you should at least consider negotiation. In fact, some companies expect candidates to negotiate and will extend their lowest offer first. Don’t sell yourself short; ask for what you are worth.
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