Far too many people have it the wrong way round when it comes to money; instead of controlling their finances, they are controlled by them. Whether you’re a young adult entering the workforce for the first time, or an older adult changing careers, many people are facing financial challenges. But being financially literate can be a key to your success, both in the short- and long-term.
Short-term you need to keep the bills paid; long-term you need to start thinking about your future – getting married, buying a home, having children, or retirement? Here are some financial literacy tips, primarily aimed at young adults, courtesy of the American Institute of Certified Public Accountants.*
- Work to a budget
The basis of any good financial plan depends on balancing your income and expenses, and budgeting accordingly. Your income may be easy to figure out, and some of your expenses should be fixed, such as rent, utilities, and groceries, but don’t forget about occasional expenses, such as clothes or car repairs.
If your income is greater than your expenses, you’re in good shape, but if it’s the other way around, you’ll need to generate more income or cut expenses, or both. If cutting expenses, look at your wants first (nights out/store bought coffees); there’s less flexibility when it comes to your needs (groceries/rent).
- Prioritize your debt
Student loans, car loans, credit card debts? Paying your debts on time will help you establish and maintain a good credit history; it’s vital to make debt repayment a priority in your budget. As for credit card debt, try to pay it off systematically. Try to pay more than the minimum due, and if you have more than one, direct any extra funds to the card with the highest interest rate.
- Review your insurance coverage
- Health insurance: Did you know that part of recent health-reform legislation means that you may be able to remain on your parents’ health insurance if you are under age 26.
- Disability insurance: If injury/illness strikes, disability insurance pays benefits to help cover living expenses if you can’t work. It may be offered through employers, or you can purchase it on your own.
- Life insurance: Getting married? Planning or have a family? Life insurance can protect your loved ones. Consider buying a small policy to cover final expenses that might be incurred if you die.
- Plan for your future
One expense you should include in your budget is saving for your future. Although retirement seems far off, start saving as soon as possible. Due to compound interest, the sooner you start saving even a modest amount, the greater the amount you can potentially accumulate over time.
- Plan for the what ifs?
If possible, try to have 3 to 6 months of expenses saved that you can access in an emergency.
Don’t forget to take advantage of the resources available to you at your Carrington College campus; speak to your Student Finance Office to learn more.
*Tips courtesy of the American Institute of CPAs – http://www.360financialliteracy.org/Topics/Budgeting-Spending/Budgeting-and-Saving/Financial-Tips-for-Twenty-Somethings
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