FOCUS ON PAYING OFF DEBT
The road to financial independence starts with paying off any debts you might’ve acquired. Debt can curb you from reaching your other financial goals, so it’s essential to tackle it early on. Having debt can be really uncomfortable, but not all debt is created equal. Carrying student loan debt can be part of a healthy financial plan if you graduated from school and increased that earnings potential. Plus, interest on student loans is tax-deductible up to the IRS-set limit.
So when you’re trying to prioritize debt vs investing, our friends at Ellevest can help with their advice on how to typically tackle debt vs. investing.
- If you have a 401(k) employer match, invest enough to max it out
- Pay off any loans with an interest rate over 5%
- Save for emergencies
- Invest in your goals
You can also find out more information regarding repayment options through the Federal Student Aid website.
The two most popular practices for debt repayment include the “avalanche method” and the “snowball method”. Both can speed-up payoffs. It’s also worth looking into a balance transfer credit card.
PAY ATTENTION TO YOUR CREDIT SCORE
Maintaining good credit is crucial for your financial wellbeing. A high credit score is especially helpful when saving and borrowing for a new home or car.
If possible, avoid using your credit card where you can. If you do end up using it, make sure to pay off your card every month. Doing so will show creditors that you are responsible and will repay any loan promptly
START BUDGETING
We’ve said it before, and we’ll say it again: START BUDGETING. The caps lock might seem aggressive, but we can’t stress how valuable budgeting can be. Here at Style Salute, we love the 50/30/20 rule for budgeting newbies. Hailed by Elizabeth Warren and Amelia Warren Tyagi, the rule is a highly effective approach to achieving your financial goals. It’s simple: 50% of your after-tax income goes towards your needs (rent, food, etc.), 30% goes towards your wants (hello, new shoes), and 20% goes towards your savings, debt repayments, and investments.
Once you have an adequate budget in order, be sure to review it on a monthly or quarterly basis, tweaking it accordingly.
CREATE AN EMERGENCY FUND
Life always has a way of throwing unexpected curveballs at us. Building an emergency fund is a great way of making sure you have enough to cover your needs in case of an emergency. It prevents you from having to rely on credit cards or high-interest borrowing options.
Figuring out how much to save in an emergency fund can be tricky, but experts suggest saving three to six months’ worth of expenses in a saving account that you can access quickly. Avoid keeping your emergency fund in your checking account. Instead, stash it in an FDIC-insured account, as the Federal Deposit Insurance Corporation insures these assets. We recommend Ellevest for this, and you can sign up in less than 10 minutes.
Fiduciaries like Ellevest have a duty to put your needs first. No ifs, ands, or buts about it. Non-fiduciaries need only to recommend products that are “suitable” — even if they’re not the lowest-cost or most ideal for you. That’s why you want to know about the fiduciary rule and ask any potential advisors if they follow that standard.
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LOOK INTO YOUR INSURANCE OPTIONS
Employment can come with significant insurance perks, including health insurance, life insurance, and disability insurance. They’re all there for you to take advantage of, but you’ll need to spend some time to assess which plans best suit your needs. For example, life insurance is perhaps more pertinent if you have financial dependents.
Another form of insurance that’s frequently overlooked is renters insurance. After graduation, chances are you’re renting a property. People make the mistake of thinking that their landlord’s insurance will cover their belongings in case of an emergency. This is not the case, so it’s imperative you stay protected by getting your own insurance. Renters insurance also provides liability coverage, which primarily protects you from any detrimental lawsuits.
CONTRIBUTE TO YOUR RETIREMENT SAVINGS
If your employer offers to match your contributions to your retirement plan, you should accept and maximize the match. When you’re young, it’s advisable to contribute to an employer-sponsored Roth 401(k) or Roth Individual Retirement Account (IRA) if they are available to you. Any contribution to a Roth account is made using after-tax dollars. Subsequently, when you do retire, you can take out the contributions tax-free.
You can learn more about your investment options here.
Fiduciaries like Ellevest have a duty to put your needs first. No ifs, ands, or buts about it. Non-fiduciaries need only to recommend products that are “suitable” — even if they’re not the lowest-cost or most ideal for you. That’s why you want to know about the fiduciary rule and ask any potential advisors if they follow that standard.
