As you start your career you would have found yourself handling many more responsibilities than what you did when you were a student. Most of the people find the activities such as budgeting, saving and paying bills on time the most frustrating.
However, if you speak with people who are older, they will tell you that they are glad that they focused on their finances when they were young, and those who did not will share they wish that they had focused on their finances.
As it is important for you to manage your finances well, we at mymoneykarma want to outline a few tips that can help place you on the correct path to manage your finances well.
Here are our 3 financial tips for people who are starting their careers:
Credit history is built over a period of time and is reflection of your financial worthiness. Therefore, building a good credit history is one of the most important things you can do.
Your credit score will play an important part whenever you apply for a loan in the future. The higher the credit score the better it is for you, as that will enable you to get better terms on the loan from the bank.
When you are starting your career the easiest way to build you credit history is to get a credit card and pay the complete balance each month. Paying the complete balance is important because revolving debt on your credit card is not helpful for your credit score. This is crucial since credit agencies use credit-to-limit-ratio as a factor in your credit score.
Additionally, student loans will be a biggest contributor of debt when you start your career and therefore are important for your credit history. If you do not pay your student loan on time or default on them, your credit score will be negatively impacted.
Focus on paying your student loans and the balance on your credit card on time and you will start building a great credit history.
Have a budget and adhere to it:
If you are starting out and do not budget your expenses, you will end up spending every thing you earn. As a result you will have very little or no savings after a few years of working. That is not a good position to be in.
The process of budgeting is deciding the amount of money you want to spend each month and then tracking that to the actual spend. While this may look very tedious the good news is that it is not that difficult. You can use mymoneykarma.com to set budgets and track your expenses.
Mymoneykarma.com automatically breaks down expenses by category and shows you how you are doing with relation to the budget you set. The awareness of where you are spending your money helps reinforce the message that budgeting matters and helps you see the places you are overspending.
Budgets will help you live within your means and save for a secure future. Therefore go ahead and set your budgets today using mymoneykarma.com.
Plan your savings:
Once you start budgeting you will have an idea of how much money you are expected to save each month. You need to have well thought out savings plan.
There are two broad buckets these savings can be categorized: Short term plan (less than 10 years) and long term plan (greater than 10 years).
Short-term savings can be used in any emergency or unexpected situation. A good example would be an emergency fund equal to three months of your income. This emergency fund might come in handy if you loose your job or face an unforeseen situation that results in loss of income.
Long-term savings are meant to help you tide over future expenses that you know you might have to incur. A long-term saving can be a saving for retirement or a saving for your children’s college fund. While the expenses might seem far away in the future it is prudent that you start saving early for them. The magic of compounding (which means that your investments earn interest and the interest then get redeployed and earns interest and so on) works better the earlier you start to save for retirement.
In summary, each of the three elements mentioned above are equally important in helping you achieve financial freedom as you progress in your life. Therefore focus on these three elements as you start your career. Use tools like mymoneykarma.com, to plan and effortlessly manage your money and stay happy in your life.