Money advice young professionals should hear

You have your first job, you’re making your own money and paying your bills – its official, you are an adult. However, young professionals do not have the same financial needs that older ones do, and as a result they need to consider the unique aspects of their situation when making financial decisions.

Sound Advice for Young People

If you are a young professional, changes are you are more focused on getting a good job, keeping that job, and advancing your career than you are on managing your money. You don’t have time to read every magazine, book, and blog to find the best financial advice, but here are some of the most important things you should know.

Understand where you are financially.

The first step to getting smart about money is to understand the big picture regarding your finances. This means more than knowing your salary and your rent; to get a full understanding of your position, you need to know the following:

-          Income, both before and after taxes

-          Fixed expenses such as rent, utilities, a car payment, and insurance

-          How much you are spending on nonessentials such as personal care, food, vacations, and eating at restaurants

-          Debt including student loans, financing your car, and credit cards

-          Interest rates on debt

-          Your company’s 401(k) plan, or similar

Take Action

Once you have a good idea of where you stand with your money situation, you can develop a plan to both improve your financial management and begin preparing for the future.

Some things you can do to take action are:

-          Start saving now. Even if you are not sure what you are going to do with the money, get in the habit of setting at least 10% of your post-tax income aside in a separate savings account – that’s about $60 a week if you are making $30,000 annually.

-          Keep an emergency fund. You never know what may happen tomorrow; having cash accessible will make it easier for you if you are in an accident, get sick, or lose your job.

-          Set a budget and stick to it. You’ve figured out what you spend money on, now take control of your spending.

-          Stop using credit cards. Unless you are paying them off each month, credit cards are part of a debt cycle that only gets worse. Get in the habit of paying in cash.

-          If you have excessive debt, develop a plan for paying it off, starting with the highest-interest debt first.

-          For more information and specific goals, consult a financial planner experienced with younger clients. They will be able to help you determine if an IRA or other investments are the right choice for you.