We've most probably heard a lot of stories from our parents and elders about how they make money and save for the family when they were young. It is also very common that people tend to look back and ask, “What if?” to the decisions they have made in the past. However, how many of them are fortunate to have no major regrets? How many of them wish to go back and relive their early 20s?
Here is a list for all of you in your 20s, as well as for some parents to consider if you have children graduating from college soon:
1. Don't rack up credit card debt, and pay any debts off quickly.
Seems simple and downright obvious, but taking on debt is easy to do. The transition from college to the working world can be expensive--new clothes, shoes, apartment, furniture, and other business-world expenses can make it easy to quickly pile on debt. Budget for these expenses, and if credit must be used to get going, have a plan in advance for paying it down. Make sure the credit limit is not more that twice of your monthly income to avoid overspending and carry forward your credit balance, which mostly incurring additional charges.2. Contribute to your Provident Fund. Just do it.
Retirement contributions build up fast, often have an employer matching contribution, and are saved before taxes. Look at it as savings with an instant profit. Maximize the match, and minimize the taxes will do the trick.
3. Start a savings plan early.
The best time to start a savings plan is before you are used to having extra money in the first place. A good rule of thumb: Use 50 percent of your after-tax paycheck (excluding Provident Fund contributions, of course) to pay for the non-negotiable "needs-based" expenses in your life, like rent and food. Use 35 percent for negotiable "wants-based" expenses--entertainment and other costs can scale back quickly if needed. Save 15 percent. You may alter the proportion according to your expenses; by reducing the "wants-based" expenses and save more.
4. Don't try to keep up with the rich.
There is no need to buy the best brand of everything right out of college. People in their 20s who are driving expensive cars, living in luxury apartments, and buying the most expensive clothes either already have money from something other than their first job or they are piling on debt--which isn't smart.
5. Pay off your highest interest-rate debt first.
Hint: It's not always the debt with the highest balance. The debt with the highest interest rate is probably the credit card you pile up on bar and that Summer trip. Pay that off first. Your student loans, while they carry a big balance and are possibly the scariest in terms of size, probably have a reasonable interest rate relative to any credit card debt.
6. Be patient.
It's easy to "want." Be patient; with hard work and good fiscal discipline, you will accumulate a nice portfolio that allows you to realize all the hopes and dreams you may have for later in life. There are probably a lot more major financial events in your future, and you'll want the flexibility to make proper decisions when the time comes.
Having cash, savings, and an investment portfolio that allow you the flexibility to take advantage of opportunities down the road will really help.
If you remember nothing else, remember this: While it seems like your life is full right now, there is probably a lot coming up--such as a first home, graduate school, and maybe even kids. And always listen to daddy.
Do you have any saving tips, share it with us here!
Looking for a saving plan with guaranteed high interest? Email me at emailpeterphang@yahoo.com
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