A 20-Something's Guide to Smart Financial Choices : Under30CEO A 20-Something's Guide to Smart Financial Choices : Under30CEO
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A 20-Something’s Guide to Smart Financial Choices

| July 24, 2012 | 13 Comments

There are many struggles facing recent college graduates in today’s society. We’ve all heard about them in the media—endless discussions of mounting student loan debt, a bitingly competitive job market, and an overall failing national (and potentially global) economy. Sure, this is a lot to take on as a 22 or 23 year old whose college safety bubble just burst. But, we—the 20-something’s of the world—aren’t nearly as wounded or weakened as many people would like to make us out to be. While the times are most certainly tough for the youth generation today, these youngster 20-somethings have also spent the past four years preparing for the approaching “real world” of a failing economy, rough job market, and drowning student debt. <br>

One of the most challenging aspects of becoming a true adult in the “real world” can be the new financial responsibilities you suddenly have to take on. With your first “real” job comes the struggle of “first job finance” issues. Consider these newbie real-world financial issues to better master the world of financial responsibility and freedom.

Building Credit

Building strong credit is very important as a new college graduate. With constant talk of record breaking student debt and huge national debt, taking out a credit card doesn’t necessarily sound like the best of ideas for many 20-somethings. Already likely in the financial hole (so to say) with student debt, taking out credit can feel like you’ll just be digging that hole deeper. However, that’s where smart credit use comes into play. Building strong credit is an important aspect of adulthood. It is through strong and reliable credit habits that you can make educated large purchases.

Explore your credit options. Find a card that offers some sort of rewards program that will benefit you and your lifestyle. There are many cards out there that offer cash rewards that can help pay a portion of your balance each month. The absolute number one tip to building credit as a young newly employed adult is to use your credit like debit. Pay off your balance in full each month. I realize this is a very ideal situation, but I’m a firm believer in not spending more than you have until you really have your financial footing.

Saving Wisely

Saving your money wisely is all about knowing what you have to save. For 20-somethings just entering the world of “real” employment, saving can be a tricky thing. Those of us who are lucky enough to find solid employment are faced for the first time with actually having some money of our own to spend. This slight financial freedom can lead to some very unwise financial habits. Take a look at how much you actually spend and what you spend it on. Understanding your money habits is the best way to then revise them and turn them into smarter choices. Something that many newbie college grads fail to do is create a habit of saving each paycheck. Pay yourself first—this is the best financial step you can take. Set up your finances to automatically put a portion of your paycheck into your savings account. By paying yourself first and making something that is done automatically, we can contribute to our savings painlessly.

Smart Investing

Investing is the next most important aspect of making smart financial choices as a young adult. This is the number one area that newbie grads fail to succeed in most often when it comes to finances. As newly graduated and newly employed individuals, the last thing on our mind is typically retirement. But, of course, retirement is one area of our finances we should consider early for the best results. Of course, everything depends on your own personal situation, but, if you are able to contribute to an employer supported retirement plan, do so. Do your research on 401ks and retirement issues in general. The more you know about the process, the better prepared you will be to deal with it. If you have the means to do so, consider opening a Roth Individual Retirement Account (IRA). These accounts allow you to contribute a chunk of money to an account where it can grow tax free, with better interest rates, and you do not have access to it until you are of retirement age. I realize that putting away the money you just gained access to until you are in your 50s is not a very desirable thing—but, preparing for the future is the first sign of true adulthood.

Lauren Bailey is a freelance blogger who loves writing about education, new technology, lifestyle and health. As an education writer, she researches and contributes to a guide to online colleges and welcomes comments and questions via email at blauren 99 @gmail.com.

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  • Baez1127

    What do you recommend for getting the first credit card?? It’s very difficult that banks approve a credit card to a recently graduated!!..

  • Baez1127

    What do you recommend for getting the first credit card?? It’s very difficult that banks approve a credit card to a recently graduated!!..

  • http://twitter.com/francescastaana Francesca StaAna

    Great post! Also, as a 20-something myself, reading the book “I Will Teach You to Be Rich” by Ramit Sethi helped me A LOT in managing my finances. (Just a quick tip for those that want to do some further reading). :)

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  • Cameron Gibson

    Overall, this is a great article.  I cannot stress enough how important it is to increase your financial intelligence in your young 20′s because our school system does not teach you anything about it.   However, in my opinion, young adults in their low to mid 20′s should not be contributing to a 401k…Taxes are bound to go up from here because of poor debt management by our government, and most young adults with their first or second job are still in a low tax bracket, so it doesn’t make sense for them to defer taxes now, and pay more tax later in retirement if they do a good job and put a good amount of money away. It is also not liquid and if there was an unexpected life event before they are 59 1/2, they would lose nearly half of their money due to taxes and penalty’s just by trying to spend their own money. 

     I think a Roth IRA is a good investment for young adults, as well as Whole Life Insurance because its liquidity, protection, and tax advantages.  Just my opinion – I started a money management practice focusing on young adults since most advisors leave that generation out to dry.  Hope this helps!

    If anyone has questions, feel free to email me at camerongibson22@gmail.com

  • http://www.springcoin.com/blog Kevin @ SpringCoin

    You’re correct, it can be difficult for you to get a credit card without any credit history.  There are several things you can do actually:

    1) Ask a family or friend to add you as an authorized user
    2) Apply for a ‘secured credit card’  

    Applying for a secured credit card is one of the quickest and most efficient ways to rebuild your credit score.  

  • http://www.springcoin.com/blog Kevin @ SpringCoin

    You’re correct, it can be difficult for you to get a credit card without any credit history.  There are several things you can do actually:

    1) Ask a family or friend to add you as an authorized user
    2) Apply for a ‘secured credit card’  

    Applying for a secured credit card is one of the quickest and most efficient ways to rebuild your credit score.  

  • http://twitter.com/20sdiaries 20 Something Diaries

    Thank you for this! It’s making us think :) FOR SURE

  • http://twitter.com/20sdiaries 20 Something Diaries

    Thank you for this! It’s making us think :) FOR SURE

  • http://paydayloansat.com/ PaydayLoans@

    Thanks for very wise recommendations. For youth it’s very important to be financially literate and get all the necessary knowledge to avoid financial mistakes. Building a strong credit is a must and it’s not worth to misuse credit cards and make debts any time there’s a need of something you have no money for at the moment. Also I think that young graduates should pay more attention to the necessity of creating an emergency fund and saving money, because it will help them to fill more financially secured. Now there’s a lot of information available for graduates and if they’ll follow the tips and make wise financial decisions then it will be much easier to build successful financial future.

  • JohnnyBarstool

    I entirely agree, Kevin. I took the secured credit card route myself (went with Capital One), paid off the balance in full each month, and by month 11 my FICO score was 100 points higher than when I’d started. (I had no credit history prior to this). Of course, due to the fees, it is best to close this account once you qualify for an unsecured card with 0 fees. Credit unions often offer the best rates.

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  • Guest

    This is brutally simple and uncreative. Sorry for the negativity but I see no necessity for this post because this is very baseline knowledge.