Financial Advice for the Young

Some people wait until their adult years to get serious about their personal finances. But developing good money habits during youth or as a young adult can put you on the right path financially. Rather than make unwise decisions and spend money frivolously, change your personal habits and increase your personal wealth.

Start Saving

Saving money may be the last thing on your mind. However, the earlier you begin a personal savings or retirement account, the sooner you can stop working and start enjoying life. Treating yourself with the occasional luxury is OK. But don't get into a habit of spending all your extra money on clothing or entertainment. Make saving money your goal. Put aside a percentage of each paycheck. Take advantage of 401(k) programs or other retirement plans offered by your employer.

Keep Debts Low

Young people tend to fall prey to the debt trap due to uncontrolled spending. Credit cards make it possible for you to establish a credit history. However, misuse of credit cards can lower your credit rating and result in massive debt that takes years to pay down. Start on the right foot and use credit cards only if you can afford to pay off charges within a month.

Build Strong Credit

Select major banks offer credit cards to young adults to help them establish credit. Take advantage of this easy approval process and create a credit file. Of course, acquiring a credit line doesn't instantly result in a good credit rating. The way you use credit determines your credit score. Creditors expect you to make on-time payments every month, and doing so results in a gradual credit score increase. Continue to pay debts as agreed, while keeping balances to a minimum and you'll score a high credit rating. The better your rating, the easier it will be for you to attain a future mortgage loan.

Don't Overspend

There is no job guarantee. You can have a job today and face a layoff tomorrow. Planning and preparing for unexpected financial mishaps can help you get through tough economic times with your head above water. It's tempting to spend when your income source appears reliable and consistent. However, overspending can impair your ability to save, and when money problems arise, you may not have enough emergency funds. Transportation and housing can take a large percentage of your monthly income. Make wise choices and choose an apartment or home and automobile that give you a financial cushion, and put away money for a rainy day.