The Amateur Financier

(Once again, I’m honored to have a guest post here on The Amateur Financier that covers an important aspect of personal finance.  Barbara Jolie shares some personal finance tips for young people, all of which will help leave them (or you) in much better shape if they’re followed.  Read and enjoy!)

In this economy, young people need all the help they can get when it comes to being financially smart. This isn’t to say that young people don’t know what it takes to handle money, but that times are tough and they need all the help they can get. Here are seven basic tips that can get young people thinking about their financial situation, which will hopefully inspire them to take care of business as soon as possible.

Set Financial Goals

Perhaps the most important tip young people should take heed of is this: in order to be financially stable, you must set goals for yourself. These goals should be a mix of long term and short term goals, and each should in some way connect to the other. For example, if your long term goal is to retire comfortably by the time your turn sixty-five, then what sort of yearly and monthly goals do you have to set in order to comfortably reach your overall goal? Whatever goals you set, they should connect to your overall goal, thus ensuring that you remain consistent in your financial actions throughout your life.

Start Saving Early

Once you have established your financial goals, you should not waste any time getting started on building your savings. Putting off setting aside money for investing in your retirement could cause you to lose important ground. Even a year or too could translate to a loss regarding how much your money could grow over the years.

Gain Knowledge

You should strive to learn as much as you can about how savings accounts and different investment opportunities work. Not only should you do your basic research, but also you should stay as up-to-date as possible regarding how the economy is doing and how it’s health of stagnation will affect your various investments. The more information you know, the better you’ll be able to decide how to manage your money.

Manage Your Debt

Many young people often graduate from college with debt from education loans. Unfortunately, some add onto this debt a good amount of credit card debt. While no debt is good debt, you would much rather deal with loan debt than credit card debt. Be smart about how you manage your debt. For example, student loans are good debt because they are generally offered at low interest rates and give you the ability to earn a higher income due to your having a college degree. In contrast, you should avoid incurring unhealthy amounts of bad debt. This means you might have to sacrifice when it comes to luxury items, but you’ll find that living bad-debt-free is much more conducive to meeting your financial goals.

Have an Emergency Fund

You’d be surprised at how many people fail to have an emergency fund available. This can be a sum of money in a separate savings account or even a self-imposed minimum amount of funds in a checking account. The important thing is that this emergency fund is available should you need it. Say you suddenly have a medical problem, or you lose your apartment to a fire. This money can help you get out of a tough spot and get your life back together. It also allows you to keep your long-term investments and retirement plan in place.

Take Advantage of Employer Matching Programs

If you are employed, you should immediately look into whether or not your employer will contribute to your 401(k). Many employers will match, up to a certain limit, whatever you put into your 401(k). As long as you remain with the company for a certain amount of years, you will be able to keep that matching should you retire or change jobs. Talk to your Human Resources contact for more information regarding retirement options.

Start a Roth IRA

Finally, you should consider opening a Roth IRA, which is a special retirement plan provided for under Federal law that essentially offers a tax break on the money withdrawn from the account. In other words, the government will tax the money you put into the account, but upon its withdrawal you will get to keep the entire sum of money. This is important because it allows you to maintain the value of your money and it doesn’t leave you guessing as to what you’ll receive when you retire.

Barbara Jolie, regularly writes for online classes.  She welcomes your comments at her email Id: barbara[dot]jolie876[at]gmail[dot]com.