Headed off to college or your first job? When you have your entire life ahead of you, credit scores and finances are usually the last things on your mind. But the financial decisions you make now can follow you through the rest of your life, so thinking about your credit and your bank account are both very wise ideas. We’ve put together this handy guide filled with simple tips that can help you get a solid financial start, which can mean less worry and more personal and financial stability in the future.
Start Saving for That First Home
You may be saving for a vacation or a new car, but have you thought about putting away a little extra for your first home purchase? A down payment is typically needed for most first-time home buyers, and saving for your down payment can actually be pretty painless. Find ways to earn funds for your savings; for example, if you have any birthdays, graduations, or holidays coming up, try asking relatives for cash gifts instead of presents. Another easy way to pad your savings is to take on a side hustle and stash the income earned into your savings account. As this first house guide from PennyMac details, there are other expenses you’ll need to consider when buying a home, such as homeowners insurance and taxes.
Create a Personal Budget and Stick to It
If you want to reach any savings or financial goal, whether it’s a down payment or more money to travel, you need a budget. Creating a budget is the most basic step toward financial stability. With a budget, you can see and correct poor money habits early, before they begin to severely impact your financial security or even your sleep habits. Thankfully, sticking to a budget is easier than ever with apps and tools that keep track of things like spending, savings, credit usage and progress towards financial goals. So download one and be sure to use it regularly.
Use Credit and Credit Cards Wisely
Once you turn 18, you’re bound to be flooded with endless credit card offers. While those cards can be a good way for young adults to build their credit, being smart about credit usage tends to trip people up when they’re first starting out, but you can avoid that same mistake. You don’t want to spend too close to your limit, and you also don’t want to miss a payment. Both can have a negative impact on your credit score, so set up automatic payments and keep a log of your credit card purchases. Also, choose your first credit card wisely, and maybe look for a card made especially for those new to credit and credit card usage.
Make That First Home an Investment
So maybe you’re years away from buying your first home. Maybe you want to travel, move around and just explore a little more before you decide to settle down. Even if this is the case, however, you’d still be wise to start saving for a down payment, which you can use to buy an investment property. You will need at least a 20 percent down payment or meet loan requirements to make this happen, but you could have a passive form of income that will take you through college and make your actual first home more affordable.
Recognize That Financial Stability is Important
It’s important to make smart choices to protect your financial stability, but doing so can also prevent problems in other parts of your life. For example, if you max out your credit cards, not only will a lower credit score make it difficult to access other forms of credit, but it could also make it harder to find a home. Even renting an apartment with bad credit can mean paying more up front or even having your application denied. Dealing with financial stress can also impact your health, which is another reason to aim for financial stability when starting out in life.
Knowing how to navigate credit and finances as a young adult can be confusing. Hopefully, the tips above can help you avoid some of that confusion and ultimately make better financial choices. The right planning and decision making now can lead to more happiness and stability in the future!
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