If you want to be a financial success, you need to start as early as possible. This is not something that you accomplish overnight. As much as we all want to be financially successful, it takes a long time to be one. Not to mention the fact that you need to exert effort to make it possible.
Not only that, being successful with finances could mean differently for some people. Other people might define it as having a stable career while others will only think they are successful if they earn a 6-figure income. Some will associate it with their debts – or the lack of debts. Then again, there may be people who will count their material possessions before declaring themselves a financial success. Then others will only feel the same if they are financially independent.
All of these are valid definitions of being successful financially. And all of them have one thing in common – you are better off accomplishing these goals if you start early.
Why young people have a hard time with financial success
Of course, if you think about the current financial predicament of new graduates, this might be harder to do. Not to be pessimistic or anything, but young people have two important hurdles that they have to overcome.
High debt levels
The first financial problem that new graduates have to overcome is their ridiculously high debts. Most of it is student loans – but other people have credit card debts and even car loans thrown in the mix. While the student loans generally have lower interest rates, the amount that has to be paid back can be crippling. Since the borrowers are students, they hardly have experience with the use of credit. So it is not unlikely that they will end up making a lot of mistakes with their debts. Although the government tries to provide ways to make repayment easier, it is a fact that it will take a long time for student loans to be paid off. It is reported that it will take close to 20 years for a new graduate to pay off their student loans.
The average student loan is more than $20,000 and for someone who is just entering the workforce, it is not likely that they can put a lot of their income into paying this off. This means financial success will be harder to achieve.
With debts restricting their financial resources, a lot of young people have to deal with limited opportunities. Sometimes, they miss out because they are too focused on paying off their debts while building their careers. Others have to consciously let go of opportunities because they cannot afford it. One report revealed that student loans, to a certain degree, forced new graduates to grab just any job so they can play their bills – even if the job is not related to what they studied.
Apart from their dream job, young people also have to push back their plans of buying a house, getting married, and becoming parents. All of these important milestones are being set aside so the student loans and other debts can be paid off.
Just these two issues alone should make you understand how hard it is for young people to achieve financial success.
How to start on financial success while you are young
While it is admittedly harder to become financially successful, that does not mean it is impossible to do. You just have to follow certain rules and you need to do it immediately. The earlier you start, the faster you can achieve financial success. The great thing about these rules is that you can most likely do these right now.
So what can you do to start setting yourself up to be successful financially?
Use a budget plan
Start with a budget plan. If you do not have one, make sure you learn how to create it. This plan does not have to be complicated. Make it as simple as you can – as long as it can help you monitor your income and the expenses that it is covering. It is the most simple way for you to check if you are overspending your budget.
Remember to make sure that your budget plan is aligned with your financial goals. Most likely, these goals will change over time. That means you need to check it every now and then. That way, you can be sure that it is still aligned with your current financial position and priorities.
Create a written financial plan
A financial plan is different from a budget plan. This is a plan that will help you establish what you want to happen in the future. That means it will list your financial goals. While it is separate from your budget plan, you need to keep both of them aligned. After all, the financial plan will show the future that you want to achieve but the budget plan will be the key to reaching your goals. You need to make sure that your budget plan reflects what your financial plan needs.
Start saving for retirement
One of the important goals that you need to set involves your retirement. You cannot consider yourself a financial success unless you are keeping up with your retirement contributions. According to statistics, 25% of millennials who want to retire by age 66 to 75 do not have retirement savings. If you have nothing saved for retirement, it is important for you to start saving for it right now. If you think that you do not have enough money because of your debts, that is okay. You should not let that stop you from saving. What you have to realize is that you can start small. As long as you start early, it is okay to save a little at a time. The compound interest will help grow that amount. Of course, once you have extra money or a higher salary, you might want to increase your contributions.
Have a plan to pay off debt
Since you have a lot of debts right now, you may want to come up with a plan to effectively pay it off. This plan should be aligned with your budget and should consider your future financial plans. Do not focus too much on the interest rate because there are more factors to consider when you try to pay off your debts. While you need to save money so you can be a financial success, your debt payments should always be among your priorities.
Automate your saving goals
Your financial plans will reflect the saving goals that you have. Once you have identified all of these, you should automate your savings. That way, you will not be tempted to use the money on something else. You can stay true to your saving goals. Having the money removed immediately from your paycheck will keep you from making excuses to use it. Soon, you will realize that you have almost reached your saving goals.
Take care of your credit score
As you make financial transactions, you need to make sure you are taking care of your credit score. Having a good credit score will help you buy a house in the future. It can also help you get a good deal in future financial products that you might need. In case you need to borrow a business loan so you can start your own company, your credit score will help in giving your credit reputation a boost. A good score, while it will not guarantee financial success, will make it easier for you to achieve it.