Personal Finance Do’s and Don’ts for Young Adults

Personal finances are a priority for young adults who recently graduated from college and started a first job. It’s essential to keep expenses as low as possible. Fortunately, there are several effective tactics for achieving this worthwhile goal. In addition to refinancing school loans to reduce monthly expenses, avoid buying brand new cars or making major investment commitments. However, one long-term goal is a must, and that’s the quest for homeownership. By planning several years ahead, young adults can make the process of buying a first home simple and painless. Consider the following do’s and don’ts to get your finances in better shape.

Do: Refinance Student Loans

If you have one or more college loans, it is wise to refinance them into a brand-new agreement. No matter how much you owe or how many monthly payments you’re making, a refi can open doors to not only lower payments but more favorable interest rates and better terms. Start by reviewing a student loan refinance blog that includes pertinent articles about the subject. Information is power, and people can save real money by arming themselves with facts. Be sure to prioritize your college loan situation and find out how much you can save by choosing to refinance the old debt.

Do: Aim for Homeownership

Start working on your credit score by checking with the three major bureaus and correcting any errors. Pay all bills in a timely fashion and keep credit usage low. The single most worthwhile thing you can do is to start saving for a down payment. Create a separate account and add funds to it regularly. Expect to save for five or more years before having enough to finance your first home.

Don’t: Purchase a New Car

New cars are not a bargain, no matter how shiny they are and what the dealer tells you about the power of the engine, the unique design of the upholstery, and the other special features and options. The minute you drive away, the book value of a new vehicle immediately depreciates as much as 10% of its total value. A much wiser way of acquiring a car or truck for personal use is to get one that’s between one and three years old.

Sticking with that age range assures buyers of getting some or most of the remaining original warranty. Plus, the purchase price of a two-year old, low mileage vehicle can be substantially lower than its brand-new counterpart. For consumers who want the latest technology in their rides, a slightly older model will typically have most of the features that come with the latest showroom models. You gain a lower price, a potential resale value close to what you paid, and more room for negotiation with dealers.

Don’t: Make Major Investment Commitments

It takes time to construct a long-term investment plan. During the first few years of your working life, avoid the urge to finalize a detailed program. Instead, take a general approach by placing whatever you can afford into a balanced portfolio that includes a healthy mixture of equities, bonds, precious metals, and commodities. Consider working with a reliable brokerage firm and using one of their pre-set templates for younger investors. Why should you avoid making long-term commitments right now?

After you reach the age of 30 and have several years of work behind you, it’s time to sit down with a financial planner and decide how to construct retirement portfolios and other assets that will support you and your family for several decades in the future. Ideally, people need to make those decisions after deciding whether to marry and raise a family and after their careers have taken shape. The early twenties are not the best age for determining such weighty issues.