Congratulations to all the new college graduates out there. Becoming independent financially is new and exciting. Here is some advice – a few things to remember that will serve you well in the long run:
Live below your means. You won’t go wrong if you always keep your expenses below your income. Not only will this allow you to save money for emergencies, vacations and retirement, but it also means you will have to adapt less should you have a period of unemployment or reduced income.
Never carry a credit card balance. Living within your means doesn’t mean you can’t charge expenses. However charge only what you know you can pay off when the statement arrives. As a young adult with a limited credit history you are probably going to have a high rate on your credit card so you don’t want the added expense of credit card interest. If you charge $1000 on a card with a 20% interest rate and pay a minimum amount of $30 per month, it will take you 4 years to pay off that balance and cost you about $470 in interest.
Start saving now for retirement. Yes, retirement is a long, long way off. But every dollar you save now will multiply exponentially over the years. $1 saved today will be worth $21 when you are 62. If you wait 10 years to start saving, you will have to save twice as much ($2.16) to get that same $21 at age 62. And if you wait 20 years you’ll have to save more than 4 times as much ($4.66).
Invest for the long-term. Be patient – chasing high returns and hot stocks will not gain you the most money in the end for many reasons, primarily because this strategy often results in buying stocks at their
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