Your youth is the best time to learn about finances because you have lots of time to start building wealth. Taking the time to educate yourself about finances allows you to be financially free in the future. There are several areas to focus on.
Consider Your Career Choices
The choices you make now have a big impact on how well off you are in the future. Everything from what you choose to spend your money on, to what you study in college, can impact your financial well-being, so it’s a good idea to choose wisely. One way of setting yourself up for success is by preparing for a job that will allow you to support yourself.
Jobs in technology, science, or engineering tend to pay better than jobs that don’t require as much preparation. Setting yourself up for success might involve going to school for a degree so you can land a desirable position. College is expensive, but you can think of it as an investment in your future. One way of paying for your education is by finding eligible scholarships. There are Going Merry scholarships for college students available that can make your education more affordable.
Without learning how to manage your money yourself, you will be at risk for scams by others who want to mismanage it. They may have poor intentions, wanting your money for themselves, but others may be uninformed and make bad recommendations. They might tell you that you need to own a house, even though you would need to go into too much debt to do so.
You know your finances the best, and you are the best person to make your financial decisions. Educate yourself by reading about personal finance, and don’t get off track once you know how to manage things. This can help you avoid the need for a personal finance makeover down the road to correct mistakes you made, innocent or not.
Create an Emergency Fund
You have likely heard you should pay yourself first, which requires you to save money for the future before going out and spending it. This can help you stay more relaxed about your future because you will have money in case you face a financial emergency. Even if you have a very tight budget, you can still set aside a little each month for your emergency fund. You can set up your paycheck or accounts to automatically put aside a bit of your paycheck. When it’s automatically taken out, you will start seeing it as any other deduction.
This is a great way to save for retirement, a home, or any other expense you have coming up. You can put it in regular savings accounts, and this can be a good place for your emergency fund since you can easily withdraw it. However, for long-term purchases, like a down payment on a home, you won’t get to take advantage of as much interest. Other options include high-yield savings account, money market accounts, and certificates of deposit. Do your research to make sure it’s the right option for you.
Think About Retirement
Retirement may be the last thing on your mind, especially if you have just started working full-time. One way of getting started is to start learning about compound interest. As you see how your money can start earning more money, you will start to see the benefit of saving as early as possible. If you save earlier, you won’t have to set aside as much principal to meet your retirement goals.
A common way of saving is through company sponsored plans. With a 401(k) plan, you can put in pre-tax money, reducing the total amount of income tax you need to pay. Depending on your employer, part or all of the contribution may be matched. Still, if your company doesn’t offer a plan or you are self-employed, you still have options. You could set up an IRA, which allows a certain amount of money to be set aside for your retirement. You could set up automatic deposits from your checking account to your IRA.
Learn About Taxes
It’s important to understand income taxes before you start earning from a full-time job. When deciding if a salary will be enough to live on, you need to look at the after-tax numbers. Planning well will also ensure that number helps you meet your retirement and savings goals too. There are calculators that will help you determine after-tax income. Everyone needs to pay federal taxes, but depending on the area, you may also face state or city taxes as well.
Currently, those who earn less pay a lower tax rate than those whose income falls into higher brackets. If you earn more money, it might be just enough to put you in a higher tax bracket, but those additional taxes might eat up anything you would have gained from the slightly higher salary. If you are thinking about moving, make sure you pay attention to tax rates in your new location.
Pay Attention to Your Health
If paying for your health insurance seems too hard, think about what you would do if you had an emergency medical bill pop up. One emergency room visit can cost you thousands of dollars and if you are uninsured, you will be on the hook to cover this. If you do not currently have insurance, now is the time to apply for it. Even if you are healthy, you could be involved in an accident that would require immediate care.
If you have a job, you might be able to get it from your employer. One option is a high-deductible plan. You can save money on premiums with this option, especially if you don’t have any major medical conditions. These types of plans come with Health Savings Accounts (HSAs). You can also shop around for plans if you need to get your own plan. If you are 25 or younger and already on your parents’ plan, you may be able to stay on that, especially if you offer to reimburse your parents for being on it.