Most people understand that they need to make money during their working years. They must use it to pay for necessities like rent or mortgage payments. They also probably have car payments, childcare bills, utility costs, grocery bills, etc.
They also need to try and put away as much money as they can for retirement. It’s all a delicate financial balancing act. We’ve come up with some money tips that should help you as you navigate your working life. If you’re not taking these specific actions yet, consider doing so.
1. Don’t Max Out Your Credit Cards
You will probably want to get at least a couple of credit cards at some point. You can get along without them, but it’s difficult. Credit cards can help you build up and maintain your credit score if you pay off the principal every pay period.
You should try not to spend beyond your means or max out your credit cards. Many experts say don’t use over 30% of your available credit if you can avoid doing so. You want to avoid carrying any balance beyond one payment period because if you do, you’ll need to start paying interest on it.
Many credit card companies charge very high interest rates, and if you start giving money to the card companies in this way, it doesn’t just hurt your credit score. It also means you’re giving away cash and getting nothing back in return.
2. Start a Rainy-Day Fund
You will also want to start a rainy-day fund as soon as possible. You can start putting money away as soon as you have anything left over after paying off your crucial bills each month.
You might open a high-yield savings account at a local or national bank. You can compare different options to see if you can find one that will give you the best rates.
Once you’ve found it, you can try to put excess money in there with every paycheck you get. You might set up an automatic deposit that puts a certain amount into that account every week, or every month if that works better for you.
You can save that money for a time when you need it. Sooner or later, you’ll usually get hit with an unexpected bill. Maybe your car needs a new transmission, or you have to pay off unexpected medical bills that your insurance does not cover.
If you do not end up having to put that rainy-day fund toward unexpected bills, you might use it for something more pleasant, like a trip. You need a break sometimes, and if you don’t go on vacation occasionally, you risk suffering burnout.
3. Invest for Retirement
Once you have a rainy-day fund up and running, you can start putting money away for retirement. It might seem too early to do that if you’re in your 20s or 30s, but the sooner you start on it, the better. Also, if you get to your 40s and haven’t started saving for retirement yet, you know you’re behind on the process.
You can look into various monetary tools and ways to save. For instance, you might put some money into a CD. A certificate of deposit will lock in that money, so you can’t use it without paying a penalty. You will get a better rate from a CD than something like a savings account, though.
If your job gives you a 401k, you should put as much money as you can into that. If they match funds up to a particular amount, that’s even better. Maybe they will match 2 or 3%, or some even match up to 5%.
If your job does not offer a 401k, you can open an IRA instead. That’s like a 401k that you put money into and take care of independently. It serves the same purpose as a 401k. When you reach retirement age, you can use that money to support yourself after your working life concludes.
4. Figure Out a Way to Conduct Your Finances that Works for You
No two people will probably have the same ideas about saving, spending, or investing. You’ll need to look at different strategies to see which one will work best for you.
For instance, you might do something like cash stuffing. You create envelopes and label each one. You might have one for rent, another for car payments, a third for groceries, and so on.
You put the right amount of cash to pay each bill in each marked envelope during a given month. Then, you use that money accordingly. If you use this strategy, you know you have funds earmarked for specific purposes. You won’t have to scramble to find money to pay your bills when they come due.
This technique might work for you, or you may go with a different one. You should know that all kinds of strategies and tools can help you, so read up on various ones to see if you can identify an appealing one.
5. Consider Consolidating Credit Card Debt
It’s easy to get excessive with credit card spending when you’re young. You might dig yourself a hole from which it’s not easy to escape if you’re spending beyond your means.
If you get into this position, credit card debt consolidation might work for you. You can ask a lending entity for a consolidation loan that you can use to pay off all your existing credit card debt. Then, you’ll only have one entity to pay back, rather than several different ones.
You might do this if you can find a lending entity like a bank or credit union that will offer you a more favorable interest rate than the credit card companies give you. You might also go this route if they offer you longer to pay back the loan. Remember, though, that if you accept a longer repayment plan, you might have to pay more in interest to the lender.