Quick Finance Tips for 20 Somethings

finance tips

Priortizing your debtFirst you (Generation Y) needs to understand how you accumulated the debt. Was the debt accumulated due to car repairs? Shopping? Education (student loans)? Vacationing? You need to identify the reasons. The debt could be good debt (potential for increase in value, such as education) or bad debt (no potential for increase in value).
You need to prioritize their debt with the highest interest rate because the card with the highest interest rate is more expensive.

Example:

ABC Credit Card 24.99% APY
XYZ Credit Card 12.99%APY
Department Store Credit Card 7.99%APY
Student Loans 4.00% APY

Typically, student loans have the lesser rate. You shouldn’t get too overwhelm about the student loans. Understanding that it further provided you an education you may otherwise have not been able to afford. You may be eligible to deduct up $2500 of your student loan interest; while, the other debt you can’t. There are two ways to

Typically, student loans have the lesser rate. You shouldn’t get too overwhelm about the student loans. Understanding that it further provided you an education you may otherwise have not been able to afford. You may be eligible to deduct up $2500 of your student loan interest; while, the other debt you can’t. There are two ways to

Typically, student loans have the lesser rate. You shouldn’t get too overwhelm about the student loans. Understanding that it further provided you an education you may otherwise have not been able to afford. You may be eligible to deduct up $2500 of your student loan interest; while, the other debt you can’t. There are two ways to payoff debt: The card with the highest interest rate is paid off first or pay off the card with the smallest balance first. By paying off the smallest balance first it will provide a psychological payoff. Remember, Generation Y needs immediate gratification. I mean we are the “iPod” Generation. Using the latter approach you will stay motivated because you will see one of your debt erased! You must decide on an affordable payment to pay the card that carries the highest rate (say, $50 over the minimum), and pay the minimum on the other credit cards. Once you finish paying off the first card, you can use the same payment schedule to pay off the next card. While the first approach my take a little longer, but it will save you more money on interest. I recommend either approach. The most important aspect is you stick with the plan you choose.FYI:  Jean Chatzky, bestselling author of Pay it Down!, has a great advice about paying off your debt $10 a day.  It’s a quick read and you will find some useful information.Once you paid off all the bad debt (such as the credit cards in my example) then you can put more towards your student loan(s).Reduce spending

Typically, student loans have the lesser rate. You shouldn’t get too overwhelm about the student loans. Understanding that it further provided you an education you may otherwise have not been able to afford. You may be eligible to deduct up $2500 of your student loan interest; while, the other debt you can’t. There are two ways to payoff debt: The card with the highest interest rate is paid off first or pay off the card with the smallest balance first. By paying off the smallest balance first it will provide a psychological payoff. Remember, Generation Y needs immediate gratification. I mean we are the “iPod” Generation. Using the latter approach you will stay motivated because you will see one of your debt erased! You must decide on an affordable payment to pay the card that carries the highest rate (say, $50 over the minimum), and pay the minimum on the other credit cards. Once you finish paying off the first card, you can use the same payment schedule to pay off the next card. While the first approach my take a little longer, but it will save you more money on interest. I recommend either approach. The most important aspect is you stick with the plan you choose.FYI:  Jean Chatzky, bestselling author of Pay it Down!, has a great advice about paying off your debt $10 a day.  It’s a quick read and you will find some useful information.Once you paid off all the bad debt (such as the credit cards in my example) then you can put more towards your student loan(s).Reduce spending
The easiest way to do this is to literally write down everything from how much money you bring home to what you spend your money on. Write down EVERYTHING you spend your money on a month. Including manicures/pedicures, gym membership, and etc. Next, assess where you spend the most money. Is it rent/mortgage? Dining out? Entertainment? Shopping? Etc? If it’s shopping then reduce the shopping, if it’s eating out then reduce eating out. You will better monitor your spending when you see how much you spend your money and on what areas.Staying motivated when paying down debt
1. By having a vision to be debt free. Remember, there’s lots of freedom to being debt free.2. Taking initiative in understanding YOUR personal finance. I’m sure there are applications for iPhones and other cell phone devices that provide quick information from the swipe of a finger roll. Read books and blogs about personal finance. Applications such a Mint are free websites to help manage your finances.3. Set goals and reward yourself. For example, if you paid off a credit card then go out and buy yourself something you can afford with cash. I will let you decide on your own reward..it shouldn’t be extravagant. Purchase items that will benefit you in the long run
Deciding between wanting to purchase and needing to purchase. If you need to purchase, then it’s for the long term. If you want to purchase, then it’s only beneficial for the short term. Example, buying a summer dress. Say you don’t have any summer dresses. I would say you would need one because the temperature in the summer can get to 90 degrees with humidity and you don’t want a pair of shorts sticking to your legs. You want something to flow on you and invite the breeze. Summer is seasonl which means it comes every year.  So, it’s for the long term.  You can wear it again next year. Another example, you have to buy the new cell phone because it has all the gadgets. No you don’t. Because every 6 months it seems there is a new cell phone–that’s short term.Moneylicious Tip: When looking at a purchase, don’t buy it right then. Walk away and come back to it in a few months. If you still want the same item at that time, then purchase it. A few years ago, I was given one of the best advice on buying a car. Look for a car you want and wait 6 months before you buy it. After 6 months if you still feel you want the car, wait another 6 months. Then if you still feel you want the car, then buy it! By that time, the car price has dropped.A few more tips on organizing your finances.
1. Use Billpay to pay your bills. It’s so much easier and takes less than 1 minute to pay all your bills.2. Keep records for your income tax. It will help with itemized deductions.3. Use Mobile banking, if applicable.4. To make managing your money easier use a free program, such as Mint or ClearCheckbook, another free website.5. Automatically contribute to your retirement savings and emergency fund.6. If possible, begin investing in an investment account even if it’s only $50 a month. That’s $1.67 a day!