Newcomers to the working world can find it challenging to manage their finances and make long-term plans. Those who do take the time to focus on things like setting up retirement accounts and refinancing college loans are far ahead of the pack. Other essential paths to financial security include learning how to save, living within your means, and acquiring relevant experience in that all-important first job.
There’s no secret formula for getting everything right the first time. But with just a little guidance and a healthy dose of solid advice, young professionals can put themselves on the right path. If you are a recent graduate, review the following points and see which ones suit your situation.
Refinance College Loans
Even if you applied for student loans with a cosigner, refinancing without one can be a central part of a secure future. That’s because when a person refinances education debt, it’s possible to not only reduce monthly payments but also to gain access to more favorable interest rates and other terms. If you’re ready to propel your lifestyle to the next level, start by reviewing a comprehensive guide that walks through the steps for refinancing student loans without a cosigner. The guide also looks at how to get approved and start saving money on monthly payments going forward.
Open a Roth IRA
For newcomers to the working world, it’s important to research retirement planning tips and to know about the three main kinds of retirement plans. If an employer offers a 401(k), most workers sign on because the accounts offer high contribution limits and are widely considered the gold standard in the US. However, if you don’t have access to a 401(k), the two remaining choices are a traditional IRA and a Roth IRA (individual retirement arrangement).
There’s plenty of debate about which is the overall smarter choice. For those who like the idea of paying taxes now and never having to pay again on the principal or interest, a Roth IRA is the way to go. They use after-tax money but offer tax-free withdrawals to retirees. Traditional IRAs give you a small tax break now, but you’ll be taxed on all withdrawals after retirement.
Save Smart & Live Within Your Means
One of the other pillars of long-term security is savings. While retirement accounts focus on creating a nest egg for post-work life, savings accounts serve another purpose. They provide working adults with a current source of funds for unexpected expenses, emergencies, and planned events like vacations, weddings, and major celebrations. What’s the ideal amount to put in an account each month?
There’s no hard-and-fast rule, but most working people try to automate the process via a payroll plan through their employers or a bank. For some, it’s enough to set aside 3% of all earned income, while others aim for the 10% mark or higher. Consider starting with 2% and experimenting with higher amounts if that feels too low. The two most effective ways to live within your means are to minimize credit card use and use a detailed monthly budget to guide spending decisions. Try to pay all card balances to zero to avoid paying interest.