Debt is one of the largest financial hurdles young working adults have to face today. Aside from providing for their families and watching over their parents, young adults, today must contend with their own huge debts. According to financial experts, approximately 80 percent of young adult households in the country have one form of debt. The combined value of all this debt is estimated to be approximately $2 trillion.
If you’re a young working professional, you may be acutely aware of the devastating effect debt can have on your future.
Below are 6 financial tips that can help a young working professional stay clear of ballooning debts and secure tomorrow’s finances.
- Plan a Budget
The first step every young professional need to master is planning a budget. It’s an essential tool for managing your finances and reducing your cost of living. A budget tracks your sources of income along with all relevant and recurring expenses. Your budget ideally covers a period of approximately two weeks to one month. Once you can see where your money is coming from and where it’s going, it will be much easier for you to manipulate the numbers and steer yourself away from debt.
2. Start Saving
No matter what your profession is, you need to set aside a proportionate size of your income for a savings account. For example, jobs for marketing majors tend to earn more, which means you can set aside a larger part of your salary for savings. Consult your budget and decide how much of your pay to put into savings. You must also consider things like your mortgage, any loans and rent when deciding how much to put into savings. Any proportion of your salary is better than none, but generally the more you can siphon into savings, the better.
3. Pay with Cash
Credit card debt is one of the largest contributors to a young adult’s debt not just in the country but the world. Modern technology and current circumstances have made people rely more and more on paying through their credit cards. You must resist this urge whenever you can.
Credit card debt can swiftly balloon, especially when you add interest rates. Credit also deducts from the money you’re going to earn instead of money you already have. If you must pay with plastic, consider getting a debit card instead. This will deduct the cost of your purchases to money you do have and you won’t be saddled with paying interest as well. Only pay with a credit card if you really have to.
4. Restructure Your Debts
Very few young adults will go through life without incurring some form of debt. Some people may get car loans or home loans, but one of the most common forms of debt is student debt. Instead of ignoring such debts, consider talking to your creditors about restructuring them.
Financial organizations and businesses would rather you be able to pay for your debt than default on them and you’d be surprised how accommodating they can be under the right circumstances. Talk to them about making it easier for you to catch up on your current debts and you can be free of these financial obligations sooner than expected.
5. Reconsider Your Residence
Too many young adults with student debts and similar financial obligations quickly try to buy real estate or rent apartments on their own. However, rent and the upkeep costs of even a small apartment can be a huge imposition on the salary of a young working professional.
Consider living at home for a few years while you save up for your own place. This will help you build up a budget as you don’t have to pay for rent. If you really must move out of your home, you best get a few roommates with whom you can split the cost of your new apartment. Defraying such massive costs like rent is important for you to gather as much money as you can early into your career.
6. Watch Your Health
One of the largest causes for debt at any age range is medical and hospitalization bills. Staying healthy is easier nowadays because of the abundance of guides all over the internet. Consult a medical professional and see how you can take care of your well-being.
Go on a run every morning, eat healthily and manage your vices. All these things can help you stay out of the hospital and incurring a massive bill that could push you into debt.
Young working professionals like yourself are only beginning their journey to financial security. Avoiding debt whenever you can is the best way for you to secure your future and ensure that your money can go to more important things.
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