Friday, August 12, 2011, AM | Leave Comment
The pension plan in most companies are on the path of extinction. The Social Security finances have been beaten to death in news and comments by all experts with no positive and beneficial result to the common man and woman in the U.S. Folks who are living in retirement or are close to it have lived their financial lives, good or bad. Whatever they could, they have either saved and invested for retirement or have blown their money when they were young. In any case, whatever they have or don’t have is it.
The young, on the other hand, have many years for saving and investing. If you guys put aside some of your income for retirement, you will somewhat live a relatively comfortable life when you eventually stop working. You must start setting up a foundation on which you can build your financial life. Remember building a secure financial future doesn’t happen overnight. Nobody has the magic wand. You must start working towards a secure financial life. By starting the process early and NOW, you can put time on your side.
Financial security may mean different things to different folks. Some feel secure when they fulfill their financial needs and can occasionally splurge a little. Others feel secure when they are doing enough that they feel confidence in their financial future. Yet others feel the financial security comes with peace of mind. I think they all mean the same thing and that is to be able to live within your means, save enough for future mishaps as well as enough saving for retirement.
When you start building a solid financial foundation, it can help you spend less time and energy worrying about your finances. Instead, you can devote your time to your family and improving your job.
Requirements for financial foundation
You need to have a basic foundation on which you will gradually build on as time progresses. It’s not that hard. You just have to put your mind to it. Because you are young, you don’t have to go into details of what exactly you should do. However, there are certain steps you can take that are kind of generic:
Setting up goals
Your primary goal must be what you want to accomplish and how much. You may go by the percentage of your paycheck that should go direct to your saving account. For example 10% every paycheck.
Living within means
You must live within your means. Remember, you always save when you save before you spend. You seldom save when you spend before you save. When you use credit card, try to pay the monthly bill in full before the due date. If not full amount, then pay half. Avoid finance and late fee charges at all cost. That may go in your credit report and you should build up your credit score. Slowly, gradually and consistently would do the trick.
You must control your spending
Those days are gone when your parents lived on other people’s money. They used credit card so ruthlessly that they kept forgetting they would ever have to pay back the rented money. Millions of parents lived on borrowed money. You, the young, are a lot smarter so act like one.
If you are employed and at least 90% of Americans are, ask your employer to deposit at least 10% of your take-home pay directly to your saving account. This way you would always save. The rest may be your spending. Pay for your utilities, rent and other monthly recurring bills and of course food.
You can create an elaborate budget for your income and expenses. But statistics show very few follow it through every month beyond 2 or 3 months. If you are that kind of organized, then go ahead build a budget. But if you are one of the overwhelming majority of young who are not very organized, do the 10% direct deposit savings plan and you should do just fine in your finances.
Build up your credit score
Like I said before, slow and gradual and being consistent have done the trick for almost everybody. Above all, it needs discipline. First read about the three large companies that keep credit record of every human in America. Good or bad, that’s the way it. We are stuck with the system and for good reasons. It’s not just credit card companies that send report to the credit bureaus if you are late in paying your bills, the utility companies and those that provide TV and phone services also may send in information.
Every time you apply for credit of any kind, the company you are working with will probably request a credit report. Not only that, employers are more commonly requesting credit reports before extending an offer of employment to a candidate. Those are the reasons why it’s critical that you take steps to ensure your credit history is positive.
Many experts have shed light on the subject of how to improve your credit score. There is really nothing to it. It’s not rocket science and you sure don’t need a calculator. You just follow the broader steps given below and you will slow and gradually build up your credit score. However, you must be disciplined to be consistent.
- Make sure you pay every bill before the due date. Avoid late payment fees.
- Pay your credit card balance off in full each month. If that’s not possible for you, strive to pay half before the due date. If you can’t pay that, then review your spending habits. Cut down on expenses. In any case, pay at least more than the minimum payment due.
- Never own more than two credit cards. Don’t borrow money to pay your credit card bills. That would mean you are definitely spending more than you can afford. In that case, control your spending.
- Last but definitely not least, get your annual credit report for free.
In a Nutshell
Because you are young and just starting out in your working life, you have a better chance than your parents to avoid getting into heavy debt. Instead you should put your mind to it and act on building a solid financial foundation for yourself and your future family.