Young professionals face various financial challenges since the worldwide issues in 2020. Such as paying off debt, saving for the future, navigating workplace benefits, and starting a family. Following these five essential financial advice for young professionals for 2021 will ensure that you live well now, retire, and are well prepared to reach your financial dreams between now and then.
Understanding what you should do now for a successful future seems overwhelming, but we have some tips here to help you stay focused this year. If you have a degree and are looking for your first “real” job, or are still in the early years of your chosen career, now is the time to develop healthy spending, saving, and allocating habits.
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1. Invest in your employer’s retirement plan
If your employer offers a retirement plan, sign up as soon as possible. Many employers claim that employees worked a minimum of time before signing up, such as six months or a year, so you may have to wait a bit if you’re new to your job.
When you are eligible to enroll in your employer’s retirement plan, you need to know how much to add. If your employer offers to match your contribution, then you must add at least your employer’s maximum matching contribution. If not, you are leaving free money on the table! Divide the matching contribution by the number of pay periods in a year and plan to add at least that amount.
2. Save 10 percent of your earnings in an emergency fund
After deducting contributions from your retirement account, figure out what 10% of your take out pay is. Put this amount in a savings account each pay period until you save up to 6-8 months in costs. This is your emergency fund, to dive in if an unexpected cost arises, such as car or home repairs, uninsured medical expenses, or sudden job loss or job reduction.
3. Avoid credit card debt
There are two important reasons to avoid credit card debt. First, you will be charged the interest. Second, if your credit card debt has a negative effect on your credit score, also known as a FICO score. He weighed his options and decided to replace the engine at a cost of $ 7,200.
You don’t have $ 7,200 in cash ready and you need your car right away, so you put that $ 7,200 on your credit card. That charge is subject to an interest rate of 18%, which you consider quite low, that is, for a credit card. Credit card interest rates can go up to 29% and more!
4. Pay recurring bills in full and on time
This is the following because it also affects your credit score. If you fall behind in paying your monthly bills, your creditors will report this to the credit reporting agency and this will have a negative impact on your credit score. As you know, those with higher credit scores can borrow money when they need it at a lower interest rate than those with higher credit scores.
The simplest thing anyone can do to preserve and improve their credit score is to pay all bills in full and on time. If you have a problem paying a particular bill, contact that creditor, as there may be a way to make the payment more affordable. For example, if your monthly mortgage payment is too high, you can ask your lender or servicer if you qualify for a loan modification to lower your payment.
5. Make a special budget and stick with it!
Between retirement savings and your emergency fund, you probably have 80% of your household salary left to live there. Decide to live it, and live well. First, write down the type and amount of all your monthly running costs, things like:
- Rent or mortgage
- Arbitrators or owners insurance
- Car payment
- Fuel, maintenance, insurance and car registration
- Health insurance
- Student loan (or contributions to 529 plans for children)
- Utilities like heat, air conditioning, water / sewer, electric
- Wi-Fi and cable
- Mobile phone plan
- Personal care such as haircuts, manicures, etc.
- Holiday gifts
And anything else you regularly spend money on, like tithing to your church or giving to charity.
Then put it all. If 80 percent of take-home pay doesn’t cover these costs, you have to cut back somewhere, because there will be the attitude of incurring credit card debt to pay those costs and we know where that takes us.
The discipline of using these five financial practices on time will undoubtedly pay off. You will enjoy knowing that you have enough money to cover your expenses, treat yourself to Chanel and you have an emergency fund to draw on.
Before you go, I hope this above article financial advice for young professionals for 2021 will be helpful and beneficial for you.