9 personal finance hacks I wish I had learned in college

9 personal finance hacks I wish I had learned in college

At least it would have been nice if someone warned me about these things right after I graduated…

When I graduated from college, I had moderate student loan debt and no credit card debt. I felt like a budget ninja for not having a balance on my card, but I had no idea the power of compound interest and retirement seemed light years away. I knew how to save, but not for big long-term goals. In college, everything is in this moment.

But now that my friends and I have reached a certain age, we realize that we could have benefited from some advice. Here’s what we wish we had been told in our twenties.

Register immediately for your company’s 401(K)

As soon as you get a mature job with a 401(k) or similar retirement vehicle, set up automated payments from your paycheck and contribute enough to get company matching funds if your workplace supports it. propose. You won’t miss what you can’t see. Trust me, saving will never be as easy as it is today without kids, mortgages, child care, braces and everything else. To aim save 10% of your gross income. Think of it as To pay oneself first.

Open a Roth IRA

If your job doesn’t offer a retirement plan, don’t skip savings. Open a Roth IRA to start compound interest while you’re young. You can contribute up to $6,000 of your modified after-tax adjusted gross income (MAGI) per year. Even if you haven’t settled into a full-time job yet, you can save in a Roth from a part-time job. Just make sure the amount is not more than what you won.

Here’s what I wish I had known. Let’s say you’re 23 and open a Roth IRA with $500 and a goal of contributing $3,000 a year until age 65. At a growth rate of 7%, your $126,000 in contributions would grow to $748,902. Save $5,000 a year and that’s $1,242,455. Wild, right? This is the power of compound interest. Even if you have to stop saving, the anticipated contributions will continue to increase. Play with it calculator.

Learn to budget

Many of us don’t really know where our money is going. But the random expenses add up quickly. If you create a plan, you can determine where you instead make it go, like long-term savings goals or student loans, and save a little more for fun. Don’t think of budgeting as a chain and chain, think of it as support. Use an app like mint to help or create a simple spreadsheet.

Create an emergency fund

Women need emergency cash, especially if you’re single or don’t have a family to rely on. The standard recommendation is 3-6 months of essential expenses, but most people don’t save even close to that, and do you really need it? At HerMoney, the recommendation is 6 weeks of expenses or, alternatively, $2,000. I like this goal. If necessary, start small, you could even reduce your pension contribution to 7% and divert 3% until you have saved it.

Pay off your credit card in full every month

It’s a big problem. I understood this one from the start, but a lot of friends had to learn the hard way. It’s best not to pay 20% interest charges or your card’s “annual percentage rate” on the monthly bill. I mean, it’s like paying a 20% tip on those cool boots. It’s not worth the shot. And you don’t need to carry a balance on your card to boost your credit score (a lot of people think so).

Discover the benefits of a good credit score

On the other hand, credit cards can be a great tool for building a high credit score, helping you get lower insurance rates, qualify to rent an apartment without a co-signer, buy your own cell phone plan, and more. I didn’t understand for years that a good credit rating could cut costs and open doors for me. Think of credit cards as a tool, not free money. Use it to pay a regular expense like a utility bill.

Watch the lifestyle creep

It’s so easy to let go of frugal living habits once we feel good on a full-time salary. But I can tell you from personal experience that living within your means pays dividends. I know the rent is ridiculous now, but that makes these little habits even more important. Things like grocery shopping instead of DoorDash takeout, the library instead of Audible, biking or taking public transit, buying second-hand, step-by-step upgrading, living with roommates. Use your local don’t buy anything Facebook group or borrow from a neighbor. All these small gestures are useful, and in addition, they are better for the environment.

Balancing debt repayment with savings goals

So, I would like to understand the difference between interest rates when I was younger. I paid off my low-interest student loans, because, you know, all debt is bad. But I neglected to save in a high interest account as a result. You can do both! Once you’ve automated retirement savings with that 7% return, figure out if there’s extra money for your student loans (interest rate generally vary from 3 to 5%). In other words, let your savings grow while paying off your debts. Of course, if you’re carrying 23% interest on credit card debt, pay it off before investing extra money in student loans.

Don’t skip health insurance!

If you’re still on your parents’ insurance plan, you’re set until age 26, but what if their plan isn’t adequate? If your job doesn’t offer health insurance or you’re between jobs, it’s very tempting to ignore it. Don’t. Check if you are eligible for a grant from your state market or even qualify for expanded Medicaid. Young people have accidents and random health problems arise. You will want to be able to access good health care. Believe me, your parents want you to have it too.

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