Four Financial Tips for Young Adults

Here are four tips for young adults and handling their finances. Sometimes the best advices come from the mistakes of others. I have made some mistakes among the advice I offer. Some of the advice comes from some of my own best practices. Young adults can improve their finances by limiting credit cards and not keeping a balance on them. They can improve their financial future by paying themselves first when they work at organizations offering 401K plans and employees stock purchasing plans. Young adults will be better able to handle life's rough spots if they invest in an emergency fund. Young adults can have a better financial future if they rid themselves of any debt they carry with them as they go out in the world.

Credit Cards

Avoid credit card debt. Credit card balances become high interest loans. They also have fee machines for being over the credit limit, annual fees, and late payment fees. Late payments, being over the limit, and carrying high balances can bring down your credit score fast. My biggest debt now besides my mortgage is credit card debt. In my experience it has been the most harmful item to my credit score. It is probably best to have one credit card for emergencies and to pay off the balances as soon as possible. Handling credit cards responsibly one can establish a good credit history and healthy credit habits.

Pay Yourself First

If your employer offers a 401K plan or similar retirement plan participate in it. Invest at least to the level your employer matches. If your employee offers an employee stock purchase plan invest in that as well. The earlier one starts to safe for retirement in theory the more savings they will have at the time of their desired retirement. Employee stock plans usually offer discounts on company stock and one can start to build a portfolio. The best of all by paying yourself forward and having the money come out of your paycheck you won't miss the money. I follow this and I find since the money comes out of your paycheck before you get your paycheck one learns to live with what is left. I have been able to invest for my retirement. Perhaps not as much as I need but it is growing. I also have been able to save quite a bit in my company's employee stock purchase program.

Start an Emergency Fund

After one has paid themselves first with money taken out of their paycheck it is wise to put some of the paycheck money away in an emergency fund. Direct deposit sometimes makes this easier as one can set up a certain amount to be paid into a savings or money market account. Sooner or later an emergency is going to happen. A car needs repair, a layoff, marriage, a move, children, the list could go on. However, by saving for emergencies one can reduce the need to go into debt. If the emergency fund gets to large excess funds can be used for other investments, to supplement retirement funds, a new car, or a vacation. I have failed to do this. However, I can see how I could have avoided more debt if I had.

Get out of Debt

If a young adult has student loans or other debt before he or she starts to make their mark in this world, they need to eliminate that debt as soon as possible. They need to make sure payments are on time. Control the debt instead of letting debt control them. Luckily for me I was able to avoid student loans so I was not burdened with a bunch of debt from the start.

More from this contributor :

Retirement Plans for Kids

How to Plan Your Retirement on a Single Salary

Four Tips to Help Rebuild a Credit Score

Sources:

Personal Experience