What are the most relevant financial suggestions for people just starting out in life? In addition to the wisdom of buying life insurance, those in their twenties should shop around for a first credit card, avoid buying new cars, save for a down payment on a house, and work on their credit scores. Here are details about what to do.
Do: Buy Life Insurance
The last thing most people in their twenties want to think about is life insurance coverage. Ironically, adults in that age group can get astoundingly low prices on policies because premiums are based on life expectancy. By locking in a low rate when you’re young, it’s possible to purchase huge dollar amounts of protection for a small monthly charge. The simplest way to find excellent deals is to consult an independent agent.
That’s a person who can sell products from dozens of different companies and find suitable options for customers based on your lifetime income expectations and other factors. Don’t procrastinate about buying life insurance. All it takes is a 30-minute consultation to get started.
Do: Apply for a Credit Card
If you’re a college student who currently doesn’t have a charge card, give serious thought to applying for one. It’s a smart move that can help you build up a rating in about six months’ time and make it easier to borrow money later in life. Note that a student credit card also serves as a backstop in emergencies, like being stranded while out driving or needing to cover an emergency medical bill. Young adults who manage their own finances need to be aware of the different features of cards, know how to apply, and understand that getting a charge card is a big step.
What’s the most efficient way to get underway? Begin by reviewing an informative guide that walks through all the pros and cons of the top-rated cards for college students. Pay attention to things like late fees, interest rates, annual fees, billing cycles, and whether the card issuer reports to one or more of the major credit bureaus. Many cards don’t report to bureaus, and several come with significant annual fees. So, it pays to use a guide to find the ones that offer the best deals.
Don’t: Purchase a New Car
Brand-new automobiles are among the most cost-inefficient assets. Their book value immediately decreases the second they leave the showroom floor, and by a substantial amount. After that, every car’s blue book value goes down by a set percentage annually, but nowhere near that initial decline that takes place the minute you sign on the dotted line. A far better plan for those who prefer to own newer cars that are still under warranty is to buy one-year-old and two-year-old models that have low mileage.
Do: Save for a First-House Down Payment
Even if you don’t plan to purchase a home soon, set up a special savings account into which you can regularly deposit money for a down payment. One reason this method works is that the standard amount lenders ask for in the form of down payments is 20% of the purchase price of the property. Unless you’re able to qualify for special financing arrangements like government guaranteed loans, it can be next to impossible to amass that much cash in a short period. By starting to set aside funds now, you gain the advantage of earning compound interest on the balance and building a substantial head start on home buying.
Don’t: Ignore Your Credit Scores
It’s essential to learn how credit scoring works. First, note that people don’t have just one rating; they have several. That’s because each of the three major reporting bureaus compiles a rating for everyone. Then, lenders use that data along with various combined versions of the scores, the most famous one being FICO. So, everyone has at least four numbers to watch, but how can you monitor yours? By law, Equifax, TransUnion, and Experian must provide a free report once per year to anyone who makes a formal request. You can do so at their websites, and it makes sense to find out what your ratings are on a regular basis. Learn to read the jargon filled reports, being careful to look for mistakes, which happen more often than you might expect.
