A basic financial life Plan For young Adults
We all know it takes more than just wanting something to make it materialize. You can want almost anything, but without taking steps to get it, a want is all that it will ever be. Financial freedom is something most of us want and in order to make it a reality we have to do some personal finance planning. Without a plan, it is very likely you will not get close to those “big” wants in life.
I know one of the hardest part of starting anything is knowing where to start. I’ve laid out some steps to show you what your financial plans should look like and where is the best place to start. I am making the assumption that you already know how much debt you have, your current credit score and all your other information. If you do not then you should read how to set-up a budget.
OK! here we go:
1)If you have credit card debt, do not charge anything else on your cards and continue making the minimum monthly payments. Your credit score is very important and should be maintained as best you can. Without a good score you will not be able to acquire loans for a car, home or other big ticket items. Paying all your bills on time will ensure your score does not take unnecessary hits.
2)Start writing down everything you spend money on. This will make it easy to track your spending and make cut backs where needed. Remember not to cut out entertainment completely, we are human and we need to have fun.
3)If you have not started an emergency fund as of yet, call your bank and set that up now. Before you pay off any outstanding debts, save at least 3 months worth of living expenses. Before anyone else get there money make sure you have yours. If you start paying off your debts and lose your job, your debts will start increasing again and you will be left without anything type of protection.
4)Once you have 3 months of emergency fund saved, you can start paying off your debts. Take ¾ of the money you were putting into your emergency fund and put towards your lowest debt first and keep putting the other ¼ in your emergency fund. Once that is paid in full go to the net one up and so on…
5)After your debts are paid, start on your retirement fund. Your emergency fund should be close to 6 months or already at 6 months. Put as much as you can in long term savings account such as Roth I.R.A, CD’s or your companies 401K. If you have a company match 401K max that out before you start on the others.
6)By now you should have 6 months of emergency funds saved, your debts paid, and started saving for your retirement. Now you can start saving for big ticket items such as a better car or a home.
As I said before, this is to give you an idea of what your personal finance plan should look like. This is not set in stone and you should use your common sense to make adjustments where you feel they are needed. Take this as a simple guide to get you started. Good luck!
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