When we leave home or college as young adults, the process of getting financially stable can be daunting. Establishing good habits from the get-go can be the difference between thriving financially or struggling. No matter how much money you have, there are things you can do to set yourself up for success. As your financial situation continues to become more stable, continuing your good habits will help you to pass through the phases of wealth accumulation and beyond.
Expect the Unexpected
When times are tight, something as simple as a flat tire or medical bill can be really a difficult storm to weather. If you are getting started, building an emergency fund is so important, but often feels daunting. It is recommended that you should have enough cash in your savings to cover 3-6 months of expenses. If that isn’t an option, you can start small. Work towards getting $500 in your savings and don’t touch it. When you have $500, try to save another $500 to get your account to $1000 and so on. Avoid using credit cards to pay for emergencies, unless you can pay the bill off right away.
Mindset Matters
Having the wrong money mindset can be costly. Be proactive about your finances. Set goals and evaluate your progress. Take responsibility for yourself and your situation. Understand that Rome was not built in a day and neither is wealth. However, taking small steps in the right direction can have big results over time. Don’t wait until you can afford to save, rather save what you can afford. Avoid comparing your finances to everyone else’s. Instead monitor your progress and celebrate your successes. Avoid instant gratification, which can lead to overspending and racking up debt. Instead plan for purchases and buy what you can afford. Pay yourself first by allocating your savings first and then live within your means with what is left. As your income increases, up your savings first then allow for increased spending with the remaining amount. Target to save 15-20%. If you can’t right away, don’t get frustrated, just increase a little each year until you get there.
Credit Crunching
Credit scores are based upon multiple factors including the types of debt (mortgages, installment, revolving lines of credit such as credit cards) and payment history. Credit scores range from 300-850 on the FICO system. Scores between 670-739 are considered Good, scores between 740-799 are Very Good and scores above 800 are Exceptional. If you find yourself below 670, don’t panic, instead look for ways to improve your score by paying on time, paying down credit cards or getting credit experience that you don’t already have. People do recover from mistakes, but it is important to address credit situations right away before it stops you from making a necessary purchase such as a car or home.
People underestimate the importance of ongoing credit monitoring. Your credit score follows you everywhere. Not only do you want to do things that add up to a good credit score, but you also want to make sure that it is being reported correctly. Consider getting a copy of your credit report annually and make sure that things look correct. Consider signing up for free credit monitoring through the credit reporting agencies. There are free and paid subscriptions that help you to monitor your credit activities, get alerts about suspicious activities and get tips about increasing your credit score.
Get a Pro on Your Team
You may be wondering when you should consider meeting with a financial advisor. People in all stages can benefit from working with a financial advisor to set goals, implement savings strategies and monitor the progress of your plan. If you are ready to get started, reach out to our team of trusted advisors today.
Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via e-mail as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation. This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
