As a young adult, you will be facing many challenges for the first time. This includes working a full-time job, figuring out what you want to do for the rest of your life, and handling your money in the real world. Here are a few matters that any young 20 something should keep in mind when planning out their finances.
BUILD EMERGENCY SAVINGS
No matter how much you plan or budget, there is still a good chance of running into an unexpected expense. This could be a medical emergency, an issue with your vehicle, or home repairs. Each paycheck, you should set aside money that is only to be used in case of an emergency. It may even be helpful to keep these funds in a separate account that isn’t tied to a debit card.
Once you start applying for jobs, loans, and apartment rentals, your credit score plays a big role in whether or not you will be approved. This doesn’t mean you have to go crazy and start applying for credit cards and make huge purchases. Simply apply for one or two credit cards and then use them to make small, everyday purchases. Then, select a time to pay off the card in its entirety. This could be at the end of each week, every time you receive a paycheck, or at the end of your card’s billing cycle. This will help improve your credit score, but reduce your likelihood of having too much credit card debt.
START RETIREMENT PLANNING
While it may seem far away, it’s never too early to start your retirement planning. If your employer offers a 401(k), enroll and find out if they do any type of match programs. If a 401(k) plan isn’t offered, you still have a few options. The first being an Individual Retirement Account or an IRA. This type of account is held at a financial institution and you contribute money before taxes. There are also ROTH accounts where contributions are taken out post tax, so once you start withdrawing, you don’t owe any more taxes. For more information on 401(k)s and IRAs, click HERE. For more information on retirement planning in your 20’s, click HERE.