Make Smart Choices With Your Finances

A Guide For Young Adults Entering The Work Force

Build Good Credit

Building a good credit score is very important as you enter the work force. With constant talk of high student debt, taking out a credit card doesn’t necessarily sound like the best idea for many 20-somethings. Many already carry student debt, so taking out credit can feel like one is just digging a deeper hole of debt. However, that’s where smart credit use comes into play. Building strong credit is an important aspect of adulthood. It is through strong and reliable credit habits that one can make educated large purchases including such things as a vehicle or first home.

Explore your credit options. Find a card that offers a low interest rate and no annual fee as well as a rewards program that will benefit you and your lifestyle. There are many cards out there that offer reward options. Share secured credit cards are also available at the credit union for those with no credit history or past bad credit. A share secured VISA can be opened with no credit check. Matching funds to the credit amount requested are frozen in a savings account. Use the credit and make monthly payments as normal to start acquiring credit. A key to building good credit as a young newly employed adult is to pay off your card balance in full each month; don’t spend more than you can pay off in a month.

How Credit Can Impact You

Credit scores are used by a wide variety of financial institutions, and businesses to determine how credit-worthy a person is. In some states car insurance companies can look at credit history to determine what kind of risk you pose, meaning how likely you are to pay your premium on time. A low credit score may be an indication that you don’t have an extensive credit history or that you’ve established a habit of paying your bills late. It’s important to understand that your credit score is not the only determinant of your auto insurance rates. A high credit score doesn’t necessarily equate to low insurance premiums. For example, if you live in an area with a statistically high crime rate and drive a car make/model that is commonly stolen, you will typically pay a larger amount of money for car insurance because you pose an increased financial risk to your provider.

 Save Wisely

Saving wisely is all about knowing what you have to save. For 20-somethings just entering the world of “real” employment, saving can be a tricky. Those who are lucky enough to find solid employment are faced for the first time with actually having some money to spend. Take a look at how much you actually spend and what you spend it on. Understanding your money habits is the best way to then revise them and turn them into smarter choices. Something that many new in the work force fail to do is create a habit of saving each paycheck. Pay yourself first—this is the best financial step you can take. Set up your finances to automatically put a portion of your paycheck into your savings account. Start small and pay yourself first as time goes by you can always increase the amount deposited.

Smart Investing

Investing is the next most important aspect of making smart financial choices. As a young adult, the last thing on one’s mind is retirement. However, retirement is one area of finances that should be considered early for the best results. If you are able to contribute to an employer supported retirement plan, do so. Some employers do a match to what the employee allocates to a retirement plan. Ask your employer what options they may offer. Do your research on a 401k and retirement issues in general. The more you know about the process, the better prepared you will be. If you have the means to do so, consider opening a Roth Individual Retirement Account (IRA). These accounts allow you to contribute a chunk of money to an account where it can grow tax free. You do not have access to these funds until you are of retirement age. Preparing for the future is a sign of true adulthood.

For more financial guidance visit Harbor Pointe Credit Union at one of three locations Downtown Duluth, Kenwood or Miller Hill. We would be happy to meet with you!