About 2 years ago one of my coworkers retired after working for over 37 years. In her last week, I decided to schedule some time to pick her brain about some things and jot down some notes. During our meeting I asked, “So are you excited for retirement?” She paused and said “I am excited, but I am also scared. I’m hoping that I have enough money.” I started to think she did not have a financial strategy in place.
We planned a retirement party for her the following week and during the week she was supposed to retire, she had a stroke. Thankfully she was able to recover and she’s doing well, but her words to me felt like a warning. As young professionals, we must create a plan and make financial independence our priority. It’s not just important for us, but also our families. So, what are some financial strategies that we young professionals can make earlier on in life?
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1. Work on your credit and build up your score
Credit scores are important. A good credit score can mean lower interest rates on mortgages, cars, and other loans. It can also mean you’ll be approved for a loan when you might not have been approved if you had a low credit score. A good credit score is important for your financial stability. Your credit score is determined by a variety of factors, including your payment history, the amount of debt you owe, and the length of your credit history. You can improve your score by paying your bills on time, keeping your debt levels low, and using a mix of different types of credit accounts. I recommend this credit improvement workbook by Tiffany Aliche, also known as, The Budgetnista!
What is a good credit score?
There are different ranges of credit scores, and each range corresponds to a different level of risk to the creditors. Here is a breakdown of the different ranges.
- 350-399: Poor credit
- 400-499: Fair credit
- 500-549: Average credit
- 550-599: Good credit
- 600-649: Very good credit
- 650-699: Excellent credit
- 700 and up: Perfect credit
What are some things to avoid when improving my score?
There are a few things to avoid when improving your score. First, don’t take on too much debt. This can hurt your score and make it more difficult to get loans in the future. Second, don’t close old accounts. This can also hurt your score. Finally, don’t go over the limit on your credit cards. This can definitely damage your score.
2. Establish a budget and stick to it.
Creating and following a budget is one of the most important financial steps you can take early on in your career. When you know how much money you have to work with each month and what expenses you need to cover, it’s easier to make informed decisions about your spending. Again, I recommend this budgeting workbook “The One Week Budget” by Tiffany Aliche, also known as, The Budgetnista!
What are some ways we can establish a budget?
- List your income and expenses: This includes everything from your rent or mortgage payment to your grocery bill. It’s important to be as accurate as possible so you can see where your money is going.
- Create a spending plan: This will help you stay within your budget and avoid overspending. Decide what categories your expenses fall into, for example, groceries, transportation, or rent. Then allocate a certain amount of money for each one.
- Make a savings goal: It’s important to have a savings goal so you can plan for unexpected expenses or future goals. Whether you’re saving for a new car or a down payment on a house, make sure to include it in your budget.
- Finally, if you have debt, make some adjustments to your spending habits in order to pay off your debt faster.
3. Invest in yourself.
One of the smartest investments you can make is in yourself. Whether you’re taking courses to improve your skills or attending workshops to learn new things, investing in your education always pays off in the long run.
What are some examples of investing in yourself?
Some ways that we can invest in ourselves is investing in books, audio programs, or online courses that will teach us new information or strategies. Attend seminars or workshops that will help you grow as a person or professional. Spend time networking with other professionals. Make a commitment to personal growth and development.
4. Start saving for retirement.
It’s never too early to start saving for retirement. Even if you can only contribute a small amount each month, it will add up over time. And if you enroll in a retirement savings plan through your employer, chances are you’ll get a nice tax break as well.
What are some ways to start saving for retirement?
One of the best ways to save for retirement is to create a budget and stick to it. This will help you figure out how much money you can afford to put towards retirement each month. We can also start small and increase our contributions over time. Another way to save for retirement is to invest in a retirement savings account. There are several different retirement savings accounts available, such as 401(k)s and IRAs. Talk to your financial advisor about the best option for you.
If you’re just interested in figuring out how to save in general, Digit is a great app that takes the guesswork out of saving money. You can create different savings goals and set minimum amounts that Digit will automatically withdraw from your bank account and save for you. You can tell the app to save money for a rainy day, a special trip or even to pay down credit card debt. Click here to download the app and we both get $5 toward our savings! Again, I recommend this savings workbook by Tiffany Aliche, also known as, The Budgetnista!
5. Invest in quality insurance coverage.
One of the best things you can do for your financial security is to obtain quality insurance coverage. Whether it’s health, dental, or life insurance, make sure you have the protection you need in case of an emergency.
What are some things to consider when investing in quality insurance coverage?
One of the most important factors is the cost of premiums. Premiums can vary significantly from one policy to another, so it’s important to compare rates and choose the policy that fits your needs and budget the best. Another important factor is the level of coverage. Make sure you understand what is and isn’t covered by the policy and be sure to ask questions if you’re not sure. You don’t want to be caught off guard if you need to file a claim. Consider the company’s reputation. Do your research and read reviews from other customers. This will help you determine whether the company is reliable and trustworthy. Lastly, be sure to review the terms and conditions of the policy before signing up. This will help you avoid any surprises down the road. By taking these steps, you can ensure that you’re getting quality insurance coverage at a price you can afford.
If you’re interested in learning more about life insurance specifically, check out my blogs about life insurance!
6. Make a list of financial goals.
If you want to achieve your financial goals, it’s important to have a clear plan and track your progress along the way. Start by making a list of what you want to achieve financially and then come up with a strategy for how you’re going to achieve them. This could include saving for a down payment on a house, saving for retirement, or investing in stocks or mutual funds. Once you have a list of goals, you can start thinking about how much money you need to save and how long you will need to save it. You can also break your goals down into smaller steps, so that they are more manageable.
Note: Please consult a financial planner or other professional for specific advice regarding your individual situation. 😊
7. Stay out of debt.
Debt can be a major financial burden, so it’s important to stay out of debt as much as possible. If you can’t afford to purchase something outright, wait until you have enough money saved up to buy it without going into debt.
What are some ways we can stay out of debt?
- Live Within Your Means
- Don’t Buy Things You Can’t Afford
- Avoid Credit Card Debt
- Create a Plan to Pay off Debt
8. Automate your finances.
One of the best ways to stay on top of your finances is to automate your payments as much as possible. By setting up automatic payments for your rent, utilities, and other bills, you’ll avoid late fees and penalties.
What are some more benefits to automating our finances?
We will be less likely to overdraw our account. Automating can help us budget better. We can save more money each month if you automate our finances. We can transfer a certain amount of money into our savings account each month. Finally automating our finances can help us save time to focus on other things because we all know, paying bills can be a time-consuming task.
9. Plan for unexpected expenses.
Unexpected expenses can pop up at any time, so it’s important to have a plan in place for when they do. Whether you save up for a rainy-day fund or have a credit card with a high limit, be prepared for when the unexpected happens. Unexpected expenses can be stressful, but with a little planning, you can manage them and stay on top of your finances. By being prepared, you can avoid getting into too much debt and keep your finances healthy.
Again, Digit is a great app that takes the guesswork out of saving money. You can create different savings goals and set minimum amounts that Digit will automatically withdraw from your bank account and save for you. You can tell the app to save money for a rainy day, a special trip or even to pay down credit card debt. Click here to download the app and we both get $5 toward our savings!
10. Learn about how taxes affect your income
Taxes can take a big chunk out of your income, so it’s important to be tax-savvy. Make sure you’re taking advantage of all the deductions and credits you’re entitled to and consult a tax professional if you need help filing your return.
What are some taxes that can affect your income?
There are a variety of taxes that can affect your income, including federal income tax, state income tax, and local income tax. In addition, there are other taxes that may impact your income, such as the Social Security tax and the Medicare tax. It’s important to understand how these taxes work so you can plan for them and avoid surprises.
11. Know your financial limitations.
It’s important to know your financial limitations and stay within them. Don’t try to keep up with the Joneses by spending beyond your means. If you can’t afford something, don’t buy it.
What are some ways we can spend below our means?
One way to spend below our means is to be conscious of our spending and make a budget. Another way is to find cheaper alternatives to the things we want or need. For example, rather than going out to eat, we can cook at home. We can also shop around for better deals on groceries, clothes, and other items. If we are willing to compromise a little bit, we can find ways to save money and live within our means. By being mindful of our spending and making small changes, we can make a big difference in our bank account. Financial strategies like these can help us stay on track and save money in the long run.
12. Manage your money wisely.
Money is a limited resource, so it’s important to manage it wisely. Spend your money on the things that are important to you and avoid frivolous purchases. Some ways that we can manage our money wisely include making a budget and sticking to it. This will help us to see where our money is going and how much we have left over each month. Second, investing in stocks or mutual funds can help our money grow over time. And finally, be careful with your spending. Try to avoid unnecessary expenses and stick to your budget as much as possible. This includes lending money to friends and family.
Conclusion:
The 12 financial strategies young professionals can use early in their career include: establishing a budget, investing in themselves, starting to save for retirement, getting quality insurance coverage, making a list of financial goals, being tax-savvy, knowing their limitations, managing their money wisely, living below their means, and improving their credit score. These are all important steps to take to achieve financial success. When it comes to money, it’s important to be proactive and start planning for your future today. By following these tips, we’ll be on the right track to achieving our financial goals.
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