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5 Things To Do In Your 20’s To Set Up Your Financial Life

Posted by on Jan 5, 2016 in Uncategorized | Comments Off on 5 Things To Do In Your 20’s To Set Up Your Financial Life

The start of a new year is a great time to evaluate your financial goals and your financial life. If you are in your 20’s, there are a lot of steps you can take to set yourself up for decades of financial success. Here are five things you need to do in your 20’s to set up your financial life. Establish A Savings Account Setting up a savings account is one of the first steps you need to take to ensure that you have a healthy financial life. Over time, it can be easy to feel like there is no room in your budget to save, which is why it is essential to make saving an essential part of your budget from the beginning. The key to saving is to develop the habit as early as possible.  See if your workplace will allow you to deposit a portion of your paycheck into a savings account and the rest of your paycheck into your checking account. If your workplace allows you to do this, try to set aside at least 10% of your take-home pay into your saving account.  Leave Your Savings Account Alone A savings account will give you money to rely on during a financial emergency. It will also give you a source of money outside of taking out a loan when you want to make a large purchase. You should not use your savings account to cover everyday purchases though. Before you purchase a ticket to that game or concert and dip into your emergency fund, be sure to evaluate if that purchase is really worth it and think about how it will affect your long-term savings goals. Establish A Cushion In Your Checking Account Most people think that savings is all about your savings account. However, your savings account should be money that you don’t touch except in case of an emergency or necessary large purchase.  For those “I don’t need it, but I want it” purchases, the money should come from your checking account. Try to build up a savings within your checking account. For example, try to build up at least an extra $1,000 in your checking account. Think of $1,000 as $0. Everything above $1,000 is fair grabs to spend on bills and everyday expenses. Once you dip below $1,000 you are dipping into your “checking savings.” Try to replenish your “checking savings” after you dip into it as soon as possible. Building some wiggle room into your checking account will allow you to have money for extra purchases and will help ensure that you don’t overdraft your account and add up unnecessary charges. Focus On Eliminating Your Debt Debt can cripple your financial life, which is why it is essential to work on eliminating your debt when you are young and have not accumulated that much debt yet.  If you have a credit card, that is one of the first types of debt that you should start paying off. Most credit cards carry a high interest rate, which means the longer you take to pay it off, the more you will pay. Try to either make an additional payment each month towards your highest interest credit card debt, or put 10% of your paycheck towards paying down your credit card debt. If you...

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