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Moving out of the family home and facing life head-on is an inevitable part of growing up. While exciting, this period of your life can be particularly stressful on your wallet. Young people who enjoy financial stability engage in a variety of smart habits, from tracking their spending to paying off debt. Here are some smart steps that you can take to protect your financial health for today and the future.
Safeguard Your Loved Ones
Making smart financial decisions is good for you, but it’s also good for your family members. Many young adults think they don’t need life insurance. While you may not yet have a spouse or children, there are several good reasons to buy a policy now. First of all, funerals can cost up to $10,000, and a life insurance policy will prevent your family from footing the bill if you happen to die unexpectedly. If you’re one of the 43 million Americans with student loan debt, life insurance will keep your loan balance from landing on your parents if you pass away.
If you have a spouse, children, or a mortgage, life insurance is a no-brainer. Plus, your life insurance premiums will be cheaper if you lock in a policy while you’re young and healthy! Depending on your current responsibilities, an affordable 20-year life insurance policy may be beneficial. This type of policy is recommended to people with young children or debts and mortgages that will be paid off within 20 years. It’s also a great option for people on a tight budget.
Go Back to School
Having a solid, reliable, and financially sound career is one great way to build stability as a young adult. However, if you don’t have an advanced degree, you may discover that landing a lucrative position is out of your grasp. Thankfully there are steps you can take to remedy this problem, and you don’t have to leave home to do it.
For example, if you’ve planned on getting your doctorate degree but never found the time, signing up for courses online allows you to fit the work into your busy schedule. And many online universities give you several different start times to choose from, allowing you to begin whenever the moment is right for you.
Automate Your Savings
Although retirement may be decades away, start saving now. Making regular, relatively small investments over many years will help you wind up with a substantial balance by the time you retire. Now is also the time to start saving for any other big goals you have, like buying a home or putting your children through college.
Since it can be difficult to save money when you’re new to living on your own, automate your savings so you don’t have to think about it. This method is especially effective if you’re saving for a down payment on a home. Discover recommends paying yourself first by having a portion of your paycheck directly deposited into a savings account. Also, be sure to contribute to your workplace retirement plan, especially if your employer offers to match your contributions.
Pay Down Debt
Saving money is important, but so is paying off your debt. Credit card debt is one of the worst forms of debt for your credit score. If possible, consider consolidating your debt into a personal loan with a lower interest rate. You may also be able to transfer your balance to a new credit card with a lengthy interest-free introductory period—just make sure you can pay off the balance before the term runs out!
If you need help monitoring your debt, Plaid Liabilities Loan API provides real-time information on your current debt, including credit cards, student loans, and mortgages. Use this information to put a payment plan together to start paying off your debt.
Curb Your Spending
Reducing your spending may be vital to meeting your financial goals. Track your purchases, keep a budget, and find ways to reduce impulse spending. For example, you may establish a rule to wait 24 hours before making a purchase, or make a shopping list and stick to it before heading to the store. If promotional emails are your weakness, unsubscribe from retail email lists that frequently send you discounts and sales. If you have trouble controlling yourself with a credit card, consider limiting going cash only. Overall, try to be conscious about where and how you spend your money. Think about how even small purchases—like a breakfast bagel—can add up over the course of a year.
The choices that you make now have the potential to impact you for the rest of your life. As a young adult, time is on your side. You’re in the ideal position to start adopting healthy financial habits that will set you up for greater stability in your future.
By Claire Wentz