Whether it’s for a midday cup of joe or a shiny new gadget, monetary decisions are made on a daily basis. Accepting a new job or leaving one impacts your future. Weighing wants with needs as you pay the bills is a major key to your financial success.
It’s nearly impossible to predict how certain choices will affect your life in the long term. When you look back, you can learn from the past and measure your success. However, you can get ahead now by taking care of some basics to establish a financial foundation for your future.
Start Paying Down Debt
It’s important to begin paying down debt as soon as possible. Debts that go to collection and end up on your credit report will stay there for seven years, but some debt, such as loans, may affect your credit score positively. Some revolving credit is beneficial to your credit score, especially when you make timely payments on credit cards or a car loan.
If you attended college and are facing scary loan debt, it’s time to get in touch with your lender and discuss repayment programs that best fit your income and career. For example, some payment plans are based on your income and may be as low as $5 a month. Don’t let that interest raise your loans by thousands in the next decade. Take a forbearance when you need it and avoid letting interest build when you suffer a hardship.
It’s important to stay on top of your debt. Most companies and lenders will work with you to create small payment plans for credit cards and hospital bills. If you are currently enduring a hardship and lacking income, check with local nonprofits and charitable agencies that may help you with bill payments to not fall behind.
Manage Your Means
Elders advise to live within your means, but most often that equals living paycheck to paycheck and not getting far ahead, but not falling in a hole. If you do trip, though, it’s hard to pick yourself back up financially, especially if you get behind on rent or have to go to the emergency room.
When you’re younger, you typically have fewer commitments than when you are older. You have a better chance to save a bigger chunk of change. Start a savings account and do your best to set a little aside every paycheck. Apps such as Qaptial or Digit help you create spending rules to save money, such as rounding up a coffee purchase to the nearest dollar and applying that difference to your savings. These apps also help you achieve goals, such as saving to take a vacation or buy a new home.
Instead of making do on whatever is left over, create a budget to manage your means, and ideally live under them to optimize savings and pay down debt. Other things you can do achieve financial balance and get ahead include:
- Automate bills that are consistent every month to avoid missed payments.
- Cut your cable and other utilities you don’t need. Shop for cheaper options.
- Only use credit cards to build your credit, and pick one or two things to regularly purchase. Always pay your bill by the due date. Using your credit card to manage your coffee or grocery budget is an idea.
Spend on Experience
When you do spend, choose experience. With a passion for travel, most millennials are doing this anyway, choosing to spend their money on experience over possessions. You don’t have to spend thousands, but no matter how much money you have, put it toward what you truly value.
Don’t choose gadgets that depreciate in value over the next five years, leaving you in debt or going out to buy something bigger and better. Spend your money on refurbished computers and travel to China instead. If you love books, build a small library, because books open up entire worlds, or you could donate to a literacy program and volunteer at the same time.
It’s OK to buy something like a new statement jacket that makes you feel amazing once in a while. Seek balance, but when it comes to spending, choose experience over stuff. You’ll have amazing stories to tell and live a more fulfilling life.
Take the opportunity now to experience the world, while building your savings at the same time. When you manage your means appropriately, your savings will grow and enable you to accomplish your dreams, rather than wasting money on possessions you don’t need. Live a rich life you will look back on and see your values reflected within.