Financial Independent

Statement balance !

Any future use of your card should be purely for convenience with the end of month statement balance always paid off in full. You may earn rewards and other benefits by using your card but pay in full every time.

Set Goals for Financial Independent

It is easy to mistake apparent wealth. When you were at college did you look at people ten or fifteen years older driving a nice car and living in a good neighborhood and wanted that for yourself? The trappings of a comfortable life may be superficial. You cannot necessarily see the reality which may be credit card debt, loans and a mortgage that are barely affordable. On graduation you have the chance to set out on your career perhaps with material aims to achieve over the next decade? This next decade is the best time to lay the foundations, a solid financial base that helps you live your life relatively comfortably. That includes retirement when you will not be receiving the monthly pay check. Your income will be the savings you have made towards retirement supported by Social Security benefits. You will need both.

It's Decision Time

There are decisions to make once you start to earn money:

  • Even if you only save a few dollars a week you should do that immediately and gradually build. You cannot live your life from pay check to pay check. You must have a plan.
  • Resolve to pay off your student loan in your 20s. The average student debt of recent graduates is $35,000 which means you need to find $3,500 plus interest each year for a decade. If you achieve that the following years should be exclusively for saving and not paying off debt.
  • Pay off credit card debt; it is expensive. You will be paying a high rate of interest on any outstanding balances at the end of the month. It is far better to get a highest chance of guaranteed 5000 loans at a cheaper rate of interest and get your debt to your credit card company down to zero.
  • If you have a good credit score that can even help you in a career move; potential employers often look at your score as part of their recruitment and interview process. Obviously the better your score the more likely you will be to be approved for mortgages and other finance.
  • An emergency fund will help you to address the unexpected. Ideally you should aim at having the equivalent of three months' salary, not because you may lose your job as much as you may suddenly have an urgent matter medically or around the house to deal with.
  • You should think about retirement even though it may be 40 years away. That includes seeing what your employee has in place. If it is a matter of starting a 401(k) then do so and get your employer's contribution. You should get a deduction into retirement savings as soon as your pay check comes in each month.
  • Get at least a basic understanding of the various investments that are available in today's world. You have access to any growth in funds that they provide for use in any part of your life.
  • Use any tax advantages that the IRS are offering.
  • Save for short term events such as Christmas or build a fund to regular periodic bills like car maintenance or insurance renewals.

Need or Want?

No one is suggesting it is easy to balance the conflicting demands on your monthly income. Your new found independence when you leave college and begin to work gives you resources but challenges you to spend them wisely. You have to differentiate between what you need and what you want:

  • You need somewhere to live if you are moving out of State to a new city for your job. That means renting somewhere in most instances. It is far more sensible to share accommodation than to look for your own place in an exclusive part of the City. You might want that but you don't need it.
  • It's nice to have an auto but if you are living in a city the most logical way to get to work is by public transport. During commuter rush hours traffic moves slowly anyway. You might want a nice auto but do you need it? If you decide to buy just so you can travel out of the city from time to time then a used and reliable vehicle should be quite sufficient.
  • You might want a holiday to an exotic location but do you need one? There is nothing wrong with having some money set aside to enjoy yourself but you should not have that at the top of your list of priorities.

There are many more practical decisions that you will face every month and there is no suggestion that you have to live frugally after you have worked so hard to graduate and start a career. Common sense dictates that you should be starting to build a solid foundation and that demands good financial management and a budget. If you do that the natural consequence will be that you will get all the things you want in time. A little thought and patience is all you need in your 20s.

Read more Comments