(Everyone should be doing)
1. Get a Credit Card (or 3!) as soon as possible.
Use the credit card for the majority of your purchases and then pay it off by the end of each month. This helps build credit and improve your credit score. (It also can build up rewards depending on the credit card!) Did you know that 15% of your FICO credit score is made up of credit age alone? So the sooner you open lines of credit, such as having a credit card, the better (as long as you use it responsibly!).
2. Make a Spending Plan.
Understand where your paycheck is going. Divide your spending between fixed expenses such as housing & utilities, and discretionary expenses such as dining out & entertainment. Once those are separated it is easier to see where you can potentially cut back on some of your (unnecessary) discretionary spending. In case you need further clarification, that $500 pair of shoes you have been eyeing goes into the discretionary expense column (nice try though!).
You want to do your best to allocate your income to be in-line with your financial goals. Remember that regardless of your income, the best piece financial advice I could ever pass on is to always live within your means!
3. Systematically Save.
Your savings account should be thought of as something you do not touch. Setup a systematic monthly transfer from your checking account to your savings account. When your funds are out of sight, they are out of mind too. This helps you to continually save on a monthly basis. A good rule of the thumb is having at least 3 to 6 months of expenses as an emergency fund saved up. Just remember, money always looks better in the bank!
4. Know Your Credit Score.
Your credit score is the most important number to know when it comes to your finances. The FICO credit score is made up of 5 factors:
- 35% payment history
- 30% amounts owed on credit & debt
- 15% length of credit history
- 10% new credit
- 10% types of credit used.
Do your best to always make payments on time, pay at least the minimum due for your debts, and do not over extend yourself by taking on too much debt. Following these 3 steps will help you increase your overall credit score. Having a good credit score is the golden ticket to buying a car, purchasing a home and even potentially being hired by a future employer . So check your number annually & get it up!
5. Start Investing!
If you have followed the above steps and have funds leftover at the end of the month, it may be time to begin investing. The most important thing to know about investing is that every investment has its own risks, regardless if it is a stock, bond or alternative. Knowing what those risks are and understanding how the investment will react to different situations in the market is the first step to investing wisely. Do some research on your own and reach out to a local financial advisor to help you get educated!
Giana C. Armano
Financial Advisor
Securities offered through LPL Financial. Member FINRA/SIPC. Investment Advice offered through Flagship Private Wealth a registered investment advisor & separate entity from LPL Financial.