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Credit Basics For Young Adults

When you graduate from school, be it high school or college, it is an exhilarating feeling.  You are finally finished with your formal education, you hopefully have a job lined up and you are out living on your own. 
It is so important to your entire financial future that you start out on the right track when it comes to your personal finances.
Here are a few tips to help you get started with a solid footing:

  • Health Insurance - When you are young and healthy you think that good health will always be yours.  Unfortunately for most this is not true.  So, it important that you make sure you have health insurance coverage.  It may be provided by your employer or you may have to pay all or a portion of the premiums.  You never know when you may have a major illness or an accident that could cost you your life's savings or indebt you for many years.   So, be sure that you have coverage.
  • Start Saving Right Away - With each paycheck put money away in savings.  Payroll deduction is the easiest way to make sure that you do this.  There are two types of savings that are important.  One is a rainy day fund for emergencies, such as losing your job.  In this fund you need around six months of living expenses.  The other type savings account is for retirement.  Don't touch this fund until you actually retire.  If you invest these funds be sure to invest it wisely.
  • Employer offered 401k - If you work for a company that will match any funds that you contribute to a 401k then this is a good way to get additional funds in your retirement savings account.
  • Pay Cash - there is nothing wrong with paying cash for things you purchase.  People tend to be more cautious with their money when they can actually see and feel it going out.  Make your credit/debit card a last resort.  It may not be as easy but you will save money on fees and interest charges, plus you will be more aware of where your money is going.
  • Accumulated Credit Card Debt - If you have accumulated credit card debt then eliminate it as quickly as you can.  Look at your credit card balances and begin by paying off the one with the highest interest rate.  If you can transfer balances to cards with lower interest rates, then do that until you can get them paid off.
  • Devise a Budget - this is extremely crucial to your financial success in life.  If you don't know where your money is going then you will never be able to get a handle on it.  Plus, you must know that what is going out is not more than what is coming in.
  • Shop With a List - Before you go shopping make a list of what you are out to purchase be that clothes or groceries.  This will prevent you from impulse purchases and going over your budget in that area.
  • Hang On To Receipts and Financial Statements - Mistakes happen and it is hard to dispute these mistakes or get them corrected if you do not have proof.  You may also need some of this paper work if you were ever audited by the IRS.
  • Be Reasonable With Indulging Yourself - Life is really hard if it is only working and paying bills.  But, it is also hard if you over indulge and have even more debt.  After you have completed your budget you will know what your surplus is and then use some of it to indulge reasonably.
  • Know Your Credit Score -Your credit rating is vital to your future financial success in life.  Get a copy of your credit report and scores and make sure that your credit rating is always spotless.  Errors and posting mistakes also happen in this area so be sure to keep tabs on what is being posted in your credit file about you.  Knowing your credit scores will also give you confidence in negotiating better deals for yourself with future borrowing.

As you enter life, you will have some good experiences and some bad ones, some ups and some downs.  If you keep your personal finances in order, then you will be able to survive the downs and profit from the ups. 

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