As a young person in your 20s, you’re probably just beginning to establish yourself in your career. You may even still be searching for your first job, along with juggling student loan payments. Nonetheless, now is the ideal time to begin establishing your financial future. Adopting smart, proactive strategies about credit cards, life insurance and investments now will pay financial dividends decades down the road.
Tame the Student Loan Monster
A significant portion of your budget may be devoted to making student loan repayments. If your budget is stretched to the limit, or you just can’t afford your payments, there are options available. If you have federal student loans, you may be able to switch to an income-dependent repayment plan or even obtain a temporary forbearance. Your options are somewhat more limited with private loans, although many lenders are willing to work with borrowers.
Be Smart With Credit Cards
If you don’t already have a credit card, it’s a good idea to apply for one or two. Credit cards help you establish your credit file. You can also use credit cards to purchase big-ticket items that you would otherwise have to pay for in cash. However, credit card debt can get out of control fast. If at all possible, pay off your credit card balance in full every month. Barring that, keep credit balances below 30 percent of available credit limit to avoid taking a hit on your credit score.
If your credit card debt is already out of control, focus on paying down your debt. If you can obtain a credit consolidation loan, you can reduce the interest you’re paying on your credit cards and possibly make lower monthly payments as well. However, you won’t be doing yourself any favors if you run up additional credit card debt after taking a debt consolidation loan.
Get Proactive About Life Insurance
If you’re young with no children and few material assets, you may think you don’t need life insurance. However, there are several reasons why obtaining life insurance is a smart strategy for twentysomethings. First, life insurance is much cheaper for people in their 20s versus people in their 30s. If you plan to have children later, purchasing life insurance in your 20s is a good idea. If your parents cosigned on any of your student loans, taking out a life insurance policy will ensure that they won’t be stuck with the bill if you were to die unexpectedly. Likewise, a life insurance policy would also cover the expenses for a funeral or cremation.
Plan Ahead for Retirement
Just as young people often don’t consider purchasing life insurance, they also neglect to invest in retirement savings. This is a mistake. By beginning to put away even small sums in your 20s, you can take advantage of the magic of compound interest. In other words, the money you invest now earns interest — and that larger sum in turn earns interest. Over the course of 40 years, a one-time investment of $1,000 earning 3 percent interest would multiply into $3,262.04, even if you never invested another penny.
Get Started on the Right Financial Path
As a young person in your 20s, it’s understandable that you are looking forward to exciting things like travel and establishing a career. However, it’s also important to begin to put your financial life in order. By doing so, you can enjoy this part of your life even more, knowing that you are also ensuring a more secure financial future.
Founder Dinis Guarda
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