Summary
- The foundations of money management are goal setting, budgeting, lowering your debt, a good credit score, and retirement planning.
- You can leverage loans to consolidate your debt and save on monthly interest payments.
- Credit scores are comprised of more than just your monthly credit card payment.
- Meeting with a financial advisor can quickly answer your questions and get you on the path to retirement.
Here’s the Deal
Starting your financial journey can be both exciting and daunting, but there are still some things you can do to start preparing your finances for brighter days. Whether you're just entering the workforce or looking to better manage your money, here are some essential tips to get you on the right track.
1. Define and Document Your Financial Goals
Setting clear financial goals is a crucial first step. These goals can be tied to major life events like getting married or buying a home, or they could focus on personal milestones like purchasing a car, taking a dream vacation, or retiring early. The earlier you identify your financial objectives, the easier it will be to create a budget, start saving, and build the investment portfolio to help you achieve your dreams. We’re here to help you define and reach for any kind of goal, and even assist in setting them.
2. Learn How to Budget
Budgeting is the cornerstone of financial success. Developing good budgeting habits early in the game will prepare you for financial stability as your career progresses. Start by reviewing budgeting basics and finding a method that works best for you. Our Enrich program is a free course offered to our members that teaches money management skills. You can make setting your financial goals easy with this tool!
PRO-TIP
Do not underestimate the importance of an Emergency Fund. We highly recommend setting aside at least $1,000 in a savings account that can be out of sight and out of mind. This fund is important because it can save you from having to finance an unexpected expense like replacing an appliance or repairing your car.
3. Minimize Your Debt
Sometimes debt simply seems impossible to avoid. Whether you’re a recent grad saddled with student loans or a seasoned professional paying off a large medical expense, debt can seem like an obstacle that never goes away. While sometimes we may take on debt to navigate certain situations, there are right ways and wrong ways to go about managing it.
If you’re struggling to get ahead on things like credit cards or student loans, you might consider consolidating your debts with a low interest personal loan. This will allow you to cut down to a single monthly payment and may help you save on your interest payments each month. It’s also a great idea to look into refinancing higher interest collateral loans if you have them. For example, refinancing an auto loan may help reduce your monthly payment.
4. Concentrate on Your Credit
With debt getting paid down and savings reaching more comfortable levels, now may be the right time to begin reaching for some of your financial goals. Just remember, buying a luxury car or moving into your dream home will still be out of reach if your credit score isn’t where it needs to be. If you aren’t sure about your credit, there are steps you can take to improve your credit score like:
- Make payments on-time by setting up autopay wherever possible.
- Pay down your credit card to keep your utilization below 30%. If you have a low credit limit which causes a high utilization rate, consider making payments just before your statement date or multiple times a month to keep your balance low.
- Keep your oldest accounts open in order to lengthen your credit history.
- Diversify your credit mix by having several credit cards and/or loans. This mix will naturally occur over time and you shouldn’t take on more debt than you need just to build credit.
Want to learn more about building good credit? Check out our Essential Guide To Understanding Your Credit Score.
5. Save for Retirement
Having a retirement savings plan is vital, even if you're just starting your career. As you plan for the future, you have to consider how much money you will need when you will retire, and how much you need to invest now in order to meet that need. Whether you’re looking at IRAs, 401(k)’s, annuities, mutual funds, and more, speaking with a financial advisor can set you on a path towards success.
PRO-TIP
Take advantage of employer contributions to your 401(k). Employer matching programs are a valuable benefit that can significantly boost your retirement savings. No matter how far off retirement seems, these contributions are a fantastic opportunity. If you change jobs, ensure you roll over your 401(k) to your new employer’s plan or transfer the funds to a tax-friendly IRA.