Dealing with your personal finances is a subject that is daunting yet so important all at once. And hardest of all is to be honest with yourself about your financial goals. So, where do you start as a young professional?
Sponsored by Fidelity Investments, experts offered tips, tricks and crucial advice to NYWICI YoPro members at “The Money Move: Take Your Finances to the Next Level” on Nov 8, 2017, at Meredith. Here are the key takeaways from the event:
Budgeting is one of the most difficult parts of managing finances, and Fidelity has structured a simple formula to assist you and help to remove the stress of spending too much on impulse purchases. Here’s the breakdown:
Percent of pay check:
50% — Essentials (rent, utilities, gas bills, etc.)
15% — Retirement (401K, 403B or IRA)
5% — Short term savings (see emergency fund details below)
30% — FUN! You should have extra money for you.
Knowing and understanding your credit score is important. Right now, it might not seem crucial, but in the future, this will help determine a loan for a house and impact other future financial options.
Be sure to regularly check your credit report and keep your credit healthy. Make your payments on-time and in full accounts for 35% of your score. Don’t max out your credit (use less than 30% of available credit) accounts for 30%. And consider other factors, such as your length of history of your credit card, credit max (different types of credit) and having new credit (but don’t open too many lines).
DEBT & EMERGENCY FUND
Things happen. Whether it’s losing your job, health issues, or any other unforeseen circumstances, it’s important to have an emergency fund. Fidelity recommends saving enough money to cover three-to-six months of essential expenses.
This emergency fund can also help you to avoid situations of debt. If you find yourself overspending or with extra expenses, this fund can help to pay off credit card bills and prevent you from accumulating debt. Remember, this fund is there to help you in emergency situations. Think of it as your financial safety net.
Investing can seem daunting and complicated, but it can become a great way to help reach your long-term financial goals.
It’s never too early to start saving for retirement. Many companies offer to match your contribution up to a certain percentage, and Fidelity stresses the importance of taking advantage of these offers. “You shouldn’t pass up free money,” one Fidelity representative said. It’s also worth noting that there are penalties to removing funds from your 401K early, so plan to keep your money invested until you reach retirement age.
And remember, start saving! Don’t fret that because you missed out on your 401K during your first few years of employment you won’t catch up.