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A Young Woman's Guide to Personal Finance
Financial Advice for Young Women
Now, I'm not a financial guru, but I can certainly tell you what makes sense if you are a young woman (or man) starting out from school. There are several things you need to do to establish your credit, stay out of debt - or get out as quickly and painlessly as possible, and save for the future. You have some big things ahead of you in life, not just including retirement. You'll probably want to buy a house one day, get married, maybe even start a family. Plus, experts say that you should have at least 6 months salary set aside for an emergency in case you get sick or injured, or otherwise unable to work.
Some basic guidelines should be followed for those young graduates just starting out.
- Create a realistic budget. Figure out what your monthly expenses are, both "hard" expenses like rent and car payments, and "soft" expenses like dinners out and lattes with friends. Make sure that you have both some cushion for emergencies and some extra money to set aside for savings. In other words, don't budget all your money to be spent!
- Pay yourself first. Once you start getting paid, see if your employer can set up an automatic deposit into 2 accounts: one portion of your check into checking and one portion into savings. If not, then be dedicated enough to march down to the bank and deposit your savings (whether $15 or $100 each month), depending on your budget.
- Pay your bills on time. This is crucial because it reflects on your overall credit rating, and it will save you the unnecessary expense of late fees, which can run up to $60 or more! With respect to utility bills, if you pay too late, you run the risk of having your water or electricity service shut off. Not only is that inconvenient, but they then require a hook-up charge to restart service. A huge hassle and waste of money.
- Get a credit card. Yes, you will need to have one. Just use it very rarely, and pay it off in full. This is so you can build your credit score, to which lenders look when its time to decide to give you a loan, and at what rate. Those with higher credit reports get lower interest rates.
Financial Books for Women
Personal Finance for Young Women
All of the above tips would equally apply to women or men, so why is this article directed primarily to women? There are several reasons. First of all, women tend to earn less than men for the same job - even in this day and age. So, it is critical for women in particular to take control of their personal finances and plan for the future as soon as possible to make up for any potential differences in compensation they may suffer.
Second, some women (hopefully fewer and fewer) allow their spouses or significant others to take control of finances in the home once they get into a serious relationship. Of course, this is a serious mistake. You must know what is going on with respect to bills and cash flow on a monthly and yearly basis. In addition, you have to plan for your own future. If you end up divorced or widowed, do you have adequate resources set aside for yourself? A personal savings account? Life insurance? What if you have children?
As a woman, you simply cannot sit by and allow financial decisions to be made for you. Nor can you only pay for the basics (paying bills and rent) and leave the rest for later. Think ahead 5, 10 or 30 years. If you cannot do this by yourself, then hire a financial planner to help you do so. Your current life situation will not be static. You need to have flexibility with respect to partners, children and jobs. Freedom is key!