Congratulations, Class of 2023! As you embark on your journey into adulthood, it’s crucial to equip yourself with essential skills and knowledge, especially when it comes to personal finance. Whether you took a personal finance class in high school or not, it’s never too late to build a solid foundation in financial literacy.
Here’s some valuable personal finance tips to help you navigate your newfound independence:
Budgeting: No surprise here – tracking your income and expenses is the first step of creating a healthy relationship with money. Categorize your monthly expenses, like rent, car, tuition, food, entertainment, etc., and calculate what you can afford under your monthly income. Allocate funds wisely and ensure that your income not only covers your expenses, but leaves room for savings. Take advantage of easy-to-use budgeting apps to help you visualize and manage your finances effectively.
Build credit: It may not seem important now, but understanding and establishing credit as young adult will set you up for the future. Once you have a reliable income source, whether it’s a summer job or the start of your career, apply for a credit card preferably with a low limit. Utilize your credit card responsibility, making timely payments and keeping your utilization low. This will help you build positive credit history, which will be useful when applying for loans or renting an apartment. One of the key factors that contribute to your credit score is the age of your accounts. So, the earlier you (wisely) use credit, the better.
Save automatically: In this new phase of your life, it can be a lot to manage everything you have going on. Take one thing off your plate by automating your savings. Whether it’s once a month or with each paycheck, determine a specific amount or percentage to transfer from your checking to savings account. With this “fool-proof” method, you’ll reach your savings goals in no time!
Be financially literate: You may be done school, but there’s a lot more learning you can do when it comes to personal finance. For example, before you get your first credit card or loan, be sure to understand the terms in the fine print and not just sign off. Don’t learn the hard way – seek out resources that will provide guidance on maintaining good financial health. This could be a parent, a professor, your bank, or online resources.
Set financial goals: Right now, the future may be unclear or even a bit scary. But, if you can get an idea of your short-term and long-term goals, it will help you stay motivated and focused on earning and saving and guide your financial decisions. These could be short-term goals like a car or a summer vacation, or long-term goals like buying a house or saving for retirement.
While we may not be able to give you tips on all things “adulting,” we can provide some guidance on starting off your journey of financial independence and responsibility. For more personal finance resources, visit www.PennCommunityBank.com.