Saturday, July 21, 2012

7 Effective Money Tips for Young Workers

7 Effective Money Tips for Young Workers

    According to the latest survey of Financial Behaviors and Financial Habits of Young Workers by The Consumer Research and Resource Centre, 47% of the young adults were seriously in debt because their monthly debt payments were 30% or more of their gross income. 37% lived beyond their means and 15% were without savings. Most of them were lacking in financial knowledge. On a score of 1 to 6 (1 – strong financial knowledge and 6 having no financial knowledge), 43% scored 4 and above. That is why they felt that they had poor financial knowledge.

You can take the following steps to put your personal finance in order:

1.      Review your financial situation: Take stock of your financial situation. Find out your take-home income, outstanding debt from various sources (mortgage, car, personal and student loan)   and your present spending pattern. You need to think of and do several things at the same time: clear your debts as soon as possible, earn more, spend within your means and cut unnecessary expenses.

2.      Getting out of debt: Your first priority is to get rid of outstanding debt especially those with high interest rates such as credit card debts. It is to avoid incurring and paying more interest.  You are also trying to keep your debt manageable so that you can avoid getting into bankruptcy.

3.      Budget: At this point after you have budgeted for your basic needs in a thrifty way, you have to allocate substantial amount of your income to reduce and eventually clear your debt.  Avoid impulse spending and forget about all your wants. Be disciplined to follow your budget and learn to appreciate what you have. The objective of your budget is to get rid of credit card debts and to avoid getting into arrears for all the other installment payments.  

4.      Emergency fund: It is mentioned in the survey that if they stopped working, the consumer had enough savings on an average for only 4 months. As soon as you are out of debt, you have to set aside an amount every month for a rainy day. It is also to develop a habit for savings. Creation of wealth starts from savings and nothing else.

5.      Credit cards: Can you handle credit cards? If you can’t, cancel all your cards and avoid making purchases on credit and get into debt and incur interest. Credit cards are for convenience only and you must make payment in full when it is due.  

6.      Earn more: Sustaining your positive working attitude, acquiring additional skills and working smart are positive ways to add value and justify for more pay. Do your home work, approach your boss at the right time and ask for it. You can also take up a part-time job relating to your expertise. As a young and energetic person you will spend more time to make extra money and avoid spending money with too much leisure time.

7.      Financial education: Learn to be money savvy. Get books, go online, attend personal finance courses or get free counseling from Credit Counseling and Debt Management Agency.  You will learn about   needs and wants, income and expenses, budget and savings, interest and debt, insurance and mortgage, investment and retirement, wills and estate management and more.

Get into good personal financial shape and enjoy financial freedom. 

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