When you're first starting out in the working world, there's a lot to learn. From balancing your career and social life to cooking, cleaning and filing your taxes, “adulting" can be overwhelming!
One of the best life lessons you can learn is how to manage your money and plan for your financial future. Building healthy money habits now will set you up for success later.
Not sure where to begin? We're here to help. Here are five smart money moves you can start making today.
#1: Build a “life happens" fund
Life happens, and when it does, it's important to be prepared. Having money on hand to cover things like car repairs, emergency medical bills and other unplanned expenses will help you stress less and avoid falling into debt.
Start by setting aside money to build a starter emergency fund of at least $1,000. Then, work towards a fully-funded account to cover three to six months of essential living expenses, including rent, food, transportation, utility bills and minimum loan payments. When you set up a financial safety net, you'll have peace of mind when life throws you a curveball!
#2: Use credit cards wisely
When used responsibly, credit cards can be a great tool to help young people build up their credit. But if you aren't careful with credit cards, you could enter a cycle of high-interest rate debt and end up harming your credit score.
If you decide to use a credit card, be aware of your limit, interest rate and possible fees. Plan to pay your balance on time and in full each month, and try to avoid getting too near your credit limit. Use your credit card to establish a habit of smart borrowing, and you'll be well on your way to a healthy credit score!
#3: Get a head start on retirement
Retirement may seem far away when you're first entering the workforce, but now is a perfect time to start thinking about your financial future. If your job provides a 401(k) plan, you should take part, especially if your employer offers to match a portion of your contributions. Start saving and investing early, and you'll enjoy the benefits of compound interest for years to come.
#4: Set saving goals
We all have goals we want to achieve someday, and your 20s and 30s are a time to dream big. Maybe you want to finish school, save up for a wedding, buy a home, start or grow your family, travel or even launch your own business. Define your goals, then prioritize your savings for each goal.
It can help to open multiple savings accounts and keep your funds separated. Put your savings on autopilot by scheduling automatic monthly transfers. It will make it easier to save and much less tempting to dip into your accounts for everyday spending!
#5: Find a budget that works for you
Following a budget doesn't mean you can't have fun with your money. A budget is simply a roadmap for telling your money exactly what to do each month.
Start by tracking your spending. When you know exactly where your money is coming from and where it's going, you'll start to see patterns in your spending habits. An online budgeting tool like Wright-Patt Credit Union's free online Money Management service can help you monitor your spending and create a budget plan that works for you.
Ready to get started on your path to financial flexibility and freedom? Wright-Patt Credit Union is here to help! Visit our online Education Center to explore a variety of helpful resources, tips and tools for smart money management.