Being a young adult and enjoying the early stages of a career, having your own place, making new friends – it all can be really exciting. However, the early years of adulthood can also be confusing and stressful. One of the reasons behind this prospective confusion and stress is money and learning how to manage it.
According to eminent financial experts like Richard Paul and Gennady Barsky, the financial planning world can be quite daunting for those who have just starting their careers or beginning to save for their retirement.
We bring you to top 5 financial planning tips from the advice offered by these experts. Take a look:
- Automate your contributions
The easiest way to invest is to automatically direct a portion of each paycheck into your investment accounts. According to Richard Paul, one can quickly get used to having less money to spend each month. This would automatically increase your savings over time. “If your employer offers a match into your retirement account, be sure to take advantage of that. That’s free money,” says Paul.
- Take control of your health
One might think that health is not a factor worth considering in the discussion of financial planning. However, investment guru Gennady Barsky advises otherwise. Being proactive when it comes to health will pay dividends in the future. According to him, investing in your health when you’re young can reduce your potential for future health care costs.
- Get out of debt
Debts are a prominent risk factor to your financial stability as a young adult. Paying down your debt can considerably reduce the amount of interest expense you pay each year. According to Barsky, people often end up paying more in interest than they are likely to earn by investing. Several studies have revealed that an average American under the age of 35 has between $23,000 and $30,000 of debt in the form of credit cards, student loans, auto loans and other forms of personal debt. A survey conducted by NerdWallet in 2017 showed that an average US household carries a credit card debt of $15,654.
- Build and protect your credit
According to Richard Paul, your credit score is a clear indicator of your financial health. “The list of people who have an interest in your credit score seems to keep growing every year. Damaged credit can be costly over time. Pay all bills on time by setting up payment reminders or enrolling in auto pay. Pay down balances on credit cards; high balances relative to total available credit affect your credit score,” he suggests.
- Buy into panic, not excitement
If the stock market sells off by 5 to 10 percent over any given month or week, you should take your excess cash and buy the dip. According to Gennady Barsky, you should only use your excess cash for this kind of investment. However, for the times the market is on a considerable rise, Barsky advises to wait for a correction if you’re sitting on the sidelines.
We hope these tips help you in planning your finances well.