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Financial Planning 101 for Young Adults and Why You Need to Pay Attention in Class

A Guest Post today –

You’re young and the world is your oyster; nobody is disputing that. The one mistake that a majority of young adults make, however, is failing to take their finances seriously. You’ve just completed four (or more depending on your major) years of college. During that time, you worked hard to earn your degree, but you also partied hard. It’s time to get serious, because failing to do so will cost you right away and over time.

Why Financial Planning Is So Important

Financial planning might seem like something you needn’t worry about until you are in your 40s or 50s but it’s important now. Your place within the global economy will directly affect your future. It’s never too early to start saving for your retirement, much less plan for unforeseen circumstances. What if you become ill and cannot work? What if something worse happens? You don’t have to be in debt for the first 20 years of your adult life if you plan accordingly.

Some Ways to Put a Financial Plan in Place

As you start your new adult life, you’re already in debt. You have student loans that must be paid off and you have a new form of independence to maintain. You’ve said sayonara to your dorm life and must now pay for your own pad, which will cost you significantly more. Yes, you’re starting out in your new career, but this won’t cover your expenses right away unless you’re extremely lucky and earned a CEO position with a Fortune 500 company upon graduation, which, face it, you didn’t.

The key to financial planning is start working on your budget and savings now. Don’t make the mistake of assuming you have time. The more you plan now, the better off you’ll be later, and your first step is assessing your student loans. How much of your monthly budget are they taking up and is there a way you can refinance them to save you money? If you can refinance them into a lower interest rate, you’ve just added thousands of dollars to your personal finances.

Another thing you should do is set a monthly budget and stick to it. Keep track of how much you spend. This helps you see where there is hemorrhaging, which will enable you to take steps to stop the financial bleeding. For example, are you paying excessively for insurance coverage you don’t need? Do you really know what insurance coverage you need? Enlist the expert guidance of a local insurance agency to see where you can save precious dough.

Avoid Luxury Expenses Until Later

Your college graduation present to yourself should not be a luxury vehicle or downtown pad. You can’t afford it, unless you secured that Fortune 500 management position discussed above. Start off small, because you will have better financial resources to go big later. When just starting out, it does you no good to exceed your financial capabilities, because stretching yourself too thin will land you residency back home with mom and dad.

You don’t want that when you’re proving to them and yourself that you’re a responsible adult now. Take your finances seriously, plan wisely, and reap the benefits in your future. You’ll be glad you did.

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