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As someone who works in Finance, I always get asked personal finance questions regarding credit scores, saving and investing. I always laugh because that’s not exactly what my job entails. As I’m not a financial adviser, but in corporate finance. However during college, I took it upon myself to learn about personal finance from books, such as “Poor Dad, Rich Dad” by Robert T. Kiyosaki. As I was learning from seeing family members who were enslaved by debt or always worried about money. Therefore I worked hard to pay all my school loans 5 months after graduated, maintained a credit score above 700, start investing for retirement at age 19, and always save money in case of an emergency. I want to share 5 simple tips to improve personal finance.
Be Responsible with Your Credit
We all know it’s effect on future purchases, but many don’t even know the factors that determine the score. The largest factor at 35% is payment history, which entails paying on bills on time. Second at 30% amounts owed, the credit used vs total credit available. Third at 15% length of credit history, which mean there is not much you can do, but if your in college I would start. Forth and Fifth, both at 10%, is new credit, how recently account opened in the last 6 months, and types of credit, such as loans, credit cards, mortgage, etc.
Save by Paying Yourself First
When you get a paycheck, pay yourself a minimum of 10% and then pay bills. While you may wonder if you have enough, you will. Simply because you will better manage the remaining money. But if your not strong enough to save, use apps such as Plentyfi and Smarty Pig. The first goal with savings should be to create an emergency fund. This fund should be 6 months worth of living in case something were to happen. After you reached that amount, save for a personal goal, such as buying a house or a trip.
Make a Plan to Pay Off Debts
While debts are unavoidable, such as cars and houses, make a plan to pay it off before purchasing. Make a six to twelve month plan, write it down, and place it where you’ll be reminded of it. Getting into this habit early on, an you will always put you in the right track to never owe more than you can handle.
Contribute To Retirement Early
It’s important to contribute to retirement as early on as possible. You will have more money for retirement from saving between the ages 20-35 then from 35-65 due to compound interest. Therefore the early years are critical to not only have for retirement, but most IRA and 401 allow the money to be used for down payment for the first home. If a 401K now available, open an IRA account or Betterment account. And once you have a 401K from an employer, max out your 401k.
Use Mobile Apps to Track Spending
Being aware of your spending is important and ensures your living within your means. Knowing how much and on what your spending on helps you evaluate which expenses are necessary and which ones are luxury. Therefore in times of needs, you’ll know areas to reduce spending. Using apps such as Mint, to organize finances, or Fudget to track spending.