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Section 18 – Planning For Your Future
Generally speaking,
making good financial decisions will result in a more
rewarding life because good credit affords you more options. In general,
people need good credit or large savings to accomplish four major goals. Those
most common include saving for retirement, having money to overcome an
emergency, make a major purchase (such as a vacation, home, or new car),
and to pay down debt. These goals will vary based on your age and where you
are in life. Usually, for new college graduates, the priority should be on saving for
an emergency, saving for retirement, and repaying debts. Saving for life’s
extravagances, such as a fun vacation or your home, can come later, after you
are more financially secure.
There are several strategies for managing debt. One strategy requires that you
focus on paying off the loans with the highest interest rates first, such as credit
cards or installment loans. While you are doing that, be sure to make the
minimum payments on any other debts so you don’t get saddled with late fees
or other penalties. Hopefully, by using this strategy, you will have some money
left over to establish an emergency fund. Experts say that you should have
approximately six months of earning in your fund that you can use for things such
as a medical bill, car trouble, or in case you lose your job. Don’t get discouraged
if you can’t build your emergency fund as fast as you like. Just keep making
progress!
Even though retirement seems like a long way off, starting to contribute when
you are young is essential to your overall financial health. Start by participating
in an employer-sponsored plan or set up an individual retirement account (IRA).
Contribute something every month. The $10 a month you save now will be worth
$100 a month in a few short years.
As your situation changes and you get older, your priorities will change.
Eventually, your student loans will be paid and your credit card debt will be
under control. At that time, you will be ready to establish new goals, like
increasing your retirement savings or purchasing a home. Using credit
responsibility and making sound financial decisions now will ensure that you have
the ability to make bigger financial purchases down the road.
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