1) Think long term. Where do you want your finances to be in 5, 10, or 40 years? If you constantly focus on what you want right now, then your financial future is in grave danger.
2) Don’t live a celebrity lifestyle while you’re earning a modest income. Face it. As a young professional you are likely not going to be making a six-figure income. Live and spend in light of that fact. Learn to differentiate between “wants” and “needs.” Spend on “needs” first, and if you have money left over after necessary expenses and savings, then you can afford to buy some “wants.”
3) Create a budget and monitor it regularly. This is crucial to having financial success in life. You can easily set and track a budget by using Mint.com (free website and app*) or other services for tracking your expenses.
4) Pay off all unnecessary debt. It’s difficult to save money when all of your extra income is going toward debt payments. If you’re stuck with a debt load with high interest rates, focus on paying that off. Once it’s gone you will have extra money to begin saving for future goals.
5) Avoid accumulating unnecessary debt at all cost. As a general rule, if you don’t have the money, don’t spend it. Sounds simple, right? High credit card debt is the worst. Not only can it ruin your credit, it can become a snowball effect to even greater debt if you are not careful.
6) Set financial goals for your future. Think about what you want your financial future to look like, and decide on ways that you’re going to make it happen. Write your goals down, and put them somewhere that you will be reminded of them often.
7) Save for retirement. Retirement is a common financial goal. If you ever want retirement to happen, it’s important to plan for it. You won’t wake up when you’re 65 with hoards of money unless you have proper prior planning or exceptionally good luck. For young folks, the best retirement savings accounts are your 401k** and a Roth IRA. Setting up automatic drafts is the best way to make sure that it actually happens.
8) Save for other future goals. Want to buy a house/boat/engagement ring? It will be difficult to make large purchases if you don’t have adequate savings.
9) Find friends whose financial values align with yours. The people with which you surround yourself greatly impact your spending habits, so choose them wisely.
10) Start immediately. Time is on your side. It is much easier to implement healthy savings habits at a young age. Also compound interest can help provide more growth in your investment accounts over time.
For more information, read about the importance of saving early or contact a fee-only financial planner.
* Since Mint is a free service, it does have advertisements – often for credit card offers. Ignore these.
**Or other employer sponsored retirement plan, such as a 403b, SEP IRA, Simple IRA, or Thrift Savings Plan
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