Yahoo Finance Money Moves to Make Before Age 30
Managing money isn't easy when you're in your 20s. You might face some serious financial obligations, from rent to student loan debt, while lacking the salary to leave a comfortable cushion each month. Then there's also the pressure to start saving early for retirement, especially if you have a full-time job that comes with 401(k) benefits. Even if you don't have the added financial demands of supporting dependents or paying a mortgage, you might feel the stress of wanting to splurge with friends or join them on a pricey getaway.
Whether you're trying to scale back spending or fund a specific savings goal, here are 10 tips to help you get on top of your finances before you turn 30:
1. Ignore your salary.
Chances are your new job requires a new lifestyle, which can be pricey. You probably need professional clothes, perhaps a new car and a place to live. That's why Liz Pulliam Weston, author of "The 10 Commandments of Money," recommends continuing to live like a broke college student even after you are gainfully employed -- at least until you get a better handle on all those new expenses.
2. Consider living at home.
You certainly wouldn't be the only one to do so. According to a Pew Research Center analysis this year, about one-quarter of millennials live in their parents' homes. Living at home can give the financial flexibility you need to shore up your finances, make a plan for paying back student loan debt and creating a budget you can live with.
3. Limit credit card debt.
Credit card debt can easily build up after college -- when expenses rise, but you're still making do on a starting salary. Credit cards also carry high interest rates and fees if you don't make on-time payments. Other than true emergencies, it's best to avoid credit card debt altogether and keep the plastic in your wallet for the times you might really need it.
4. Pay off any debt you do have.
While your goal should be to pay off each card in full each month, that might not always be possible. If you've built up some debt, then start paying it off as soon as possible. To decide which card to pay off first, LowCards.com CEO Bill Hardekopf suggests choosing the one with the lowest credit limit, since exceeding the limit can tack on extra fees and damage your credit rating.
5. Put student loans on autopilot.
While you want to make all monthly payments to your student loan provider, there's not usually any need to fast-track those payments. In other words, you can continue to make slow and steady monthly payments throughout the life of the student loan, unless it has an unusually high interest rate or you have the extra cash to spare to pay off the debt altogether.
6. Create an emergency cushion.
Weston advocates building up a cash cushion of at least $500 for emergency expenses, which can be anything from car repairs to dental work. The goal should be to have six months of expenses stored in a bank account in case of a sudden job loss, but the timeline is more flexible for 20-somethings who can't build that cushion right away.
7. Insure yourself.
Make sure you have health insurance, rental insurance and even disability and life insurance, especially if you are financially responsible for other people like children. Just one accident or illness can wreak havoc on your finances if you're not covered.
8. Make long-term goals.
Simply articulating big goals, such as buying a home or traveling around the world, can help you move toward them. If you get an early start on saving up for one of those big goals, then you can take advantage of compounding interest and reach your goal sooner.
9. Save for retirement.
Retirement seems like eons away to a 20-something, but saving as soon as you get your first job will make it far easier to reach your retirement goals well before the big day actually arrives. If your employer offers matching contributions to a 401(k), then you'll want to take advantage of that, too.
10. Monitor your investments.
Many people forget to rebalance their investments, check on the fees they are paying or adjust their portfolios as they age. That can result in lost earnings and a lack of preparedness for retirement when the day does come. Check in on your accounts at least quarterly, and ask your financial services provider questions if you don't understand the fees or investment options.
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