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Moving out of your parents’ home and facing the world on your own is incredibly liberating. While you’re probably full of excitement, try not to get too caught up in your newfound freedom.
The financial decisions you make over the next few years could seriously impact you for the rest of your life!
You’re at the ideal age to start thinking about your financial future, even if your long-term goals seem lightyears away.
So start making a plan to pay off debt, protect your credit score, and prevent unnecessary spending. Here are some smart financial decisions to consider as you shift into a life of greater financial independence.
1. Buy Your First Home.
Home ownership is a next step for many young people beginning their independent lives. Your venture into the housing market begins with setting a budget for your purchase, which should include looking at the expenses of homeownership.
Keep in mind that simply maintaining a property costs £2,000-3,000 every year. You’ll also need to ensure your credit score is in good shape before applying for your loan, and you’ll need to set aside funds for a down payment.
With the large amount of money involved, it can be tempting to cut corners. Many property hunters watch glamorous television shows that smoothly flip run-down, outdated properties in a half hour segment.
Watch out for notably low price tags and as-is home sales, though. Oftentimes the issues that must be addressed can seriously affect your well-being and your pocketbook.
Things like foundation problems, mold, or a leaky roof are costly to repair and can prevent you from living comfortably and safely in the home.
Do your due diligence and connect with professionals for advice if you decide on such a purchase. Input from an attorney and a building inspector can save you a great deal of headaches.
2. Purchase Life Insurance.
Buying a life insurance plan is the most unselfish gift you can give your family. If something were to happen to you.
Your insurance policy will cover all of your existing debts — such as medical bills and student loans.
So your family won’t be on the hook for these expenses. Your family can also use your life insurance payout to cover your funeral and burial costs.
Most people don’t start thinking seriously about life insurance until they get married, buy a home, or have kids.
But there are several great reasons to buy life insurance as a young adult. People who are young and healthy can lock in some very low life insurance premiums today.
Rates that won’t be affected by any unforeseen illnesses that pop up in the future. You’ll likely need to buy life insurance at some point, so take advantage of your good health and secure a low rate while you can.
3. Build An Emergency Fund.
Everyone needs an emergency fund! You can think of an emergency fund as a kind of cushion to protect your financial health from unexpected events that threaten your income or create large expenses.
When emergency strikes, your emergency fund will prevent you from going into debt, hurting your credit score, or taking money out of your long-term savings.
Most experts recommend stashing away at least six months’ worth of living expenses in a savings account that you can draw on for emergencies.
However, the ideal number for your emergency fund is completely dependent on your personal circumstances.
If you are working a stable job and have few financial obligations, you probably don’t have to set aside as much as someone who is self-employed, starting a family, or battling a chronic illness.
4. Learn How To Invest.
Much like buying life insurance and building emergency savings, investing is best started at a young age.
The earlier you start investing matters more than the amount of money you invest!
By investing your money as early as possible, the power of compound interest is on your side, helping you rack up some serious savings by the time you retire.
Start investing as soon as possible, even if you only have a small amount of money saved. Investing a small amount to start will help you get the ball rolling while you learn more about how the stock market works.
5. Create A Monthly Budget.
If you want to meet all of these financial goals, a monthly budget is an absolute must. A good budget will help you cut back on guilty pleasures and keep your spending priorities organized.
Try to create a budget the moment you venture out on your own to help you live within your means, avoid taking on unnecessary debt, and learn to separate your needs from your wants.
You can easily start your budget with automated software or an app to make it as easy as possible to track and review your spending habits consistently.
Making smart financial moves now will set yourself up to enjoy a secure future.
Don’t wait for a major life event to get your financial affairs in order. Do your future self a favor by adopting good spending habits, setting long-term goals, and learning how to invest as soon as possible.
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