Your formal Education may be coming to the end, but a whole new learning experience is about to begin. What do you know about handling your finances on your own? Here I rearrange dozens of questions & answers to help you, sure, if you have better experiences or hints, you are welcome to share. We all know there is no extra credit to make up for your mistakes in real life.
Spending & Saving
1. Do I really need a budget?
Yes. When you're just starting out, you face a ton of new expense--rent, student loans, utilities, car,etc... so you want to make sure you have enough money to go around. "Start by tracking all your expenses each month, including whatever you pay for with cash. Then, look for eares where you can use your money more wisely. See "Budget for Your Peace of Mind" for more information, and use the "Budget Worksheet" to help you track your expenses.
2. How much money should I spend each month on food, rent, etc?
A. Below is a guideline to help you budget your money to make sure your expense are covered. You might have to make some adjustments for your situation. And remember these percentages apply to your take-home pay, not gross income before taxes and other deduction.See "Cost-of-living Reality Check".
30% Housing
10% Utilities and other housing expenditures (Including renters insurance)
15% Food (at-home and away)
10% Transportation (including car loan)
10% Debt repayment (student loans and credit cards)
10% Saving
5% Clothing
5% Entertainment
5% Car insurance and miscellaneous personal expense
3. How do I go about paying back my student loans?
All good things must come to an end, and that includes the "free" money you received to pay school. Luckily, you get a six-month grace period after graduation before you must start paying back your federal loans. So may graduates won't see their first bill until November. Then, you generally can choose whether you want to make fixed payments over ten to 30 years, make payments that gradually increase over time, or make variable payments based on you income. See "How to Repay Student Loans" for a game plan that works for you.
4. How can I save money on my student loans?
Of course, the quicker you pay them off the more money you save on interest. You might also benifit from consolidating you loans with a lender that offers a few perks. Use the Kiplinger's tool to find out "
5. I applied for a credit card but got turned down because I don't have any credit. How can I build a credit report from scratch?
It's a modern twist on the classic chicken-or-the-egg conundram: You can't get credit until you have a history of repaying credit. A great way to get around this barrier is to get a secured credit car. These cards allow you to make a deposit with a bank or credit union and that amount ususlly becomes your credit limit. You build a history just as fast as you would with a regular credit card, and after making on-time payments for a year, you should have an adequate credit history to switch to an unsecured card and get your deposit back. See "Build Credit Without a Credit Card" for more tips.
6. What is the best type of credit card for me?
Do you intend to carry a balance most months? if so, finding a card with a low interest rate is you top priority. But if you plan to pay off your balance each month--which highly recommend- you want a card that doesn't charge an annual fee. You interest rate won't matter because you won't be charged if you don't carry a balance. See "Credit Cards You'll Love" for 11 cards that are appealing.
7. As long as I make the minimum payment on my credit cards, I am Okay, right?
Wrong!! That'll be enough to keep the credit police off you back, but it doesn't go far enough. Consider this: if you have $3,000 on a credit card charging 18% interest, and you made a required 4% minimum payment each month, it would take you about three years to pay it aff and cost you an extra $800 in interest. You should aim to pay off your high interest debt as soon as possible, even before investing your money elsewhere. Use calculator to find out "What It'll Take to Pay Off Your balance." Then check out strategies to help you "Climb Out of Debt Faster".
8. I finally have some cash to put in savings. Where exactly should I keep it?
Your first stop is your emergency fund. You should aim to have enough money on-hand to cover three-to six months' worth of living expenses in case something unexpected were to happen. Start out by saving $1000 in a high yielding money-maket saving account, such as "Emigrant Direst" or "ING Direct". These two reputable institutions are FDIC-insured, pay you a nice interest rate on your mondy and you're free to join. Once you've got your initial $1000, you should keep socking away some money each month to build your stash higher. But you also can start investing part of your extra money each month into other investments and retirement accounts, such as a "Roth IRA". or a 401(k).
9. My salary is pathetic. How can I build an emergency saving fund when I make squat?
We know, the idea of saving up to three to six months' worth of living expenses may seem impossible. Focus, instead on saving just $1,000 to start, that's $83 a month for one year and steadily working your way up from there. Still seems steep? Did you get a tax refund or cut back. See Save Money on Practically Everything for more ideas. The key is to start saving something, no matter how little--"Build your Financial Foundation".
10. How can I make a million bucks without having to work for it?
Marry rich. Win the lottery. Or, start investing your money an a regular basis. If a 25-year-old invested $200 a month and earned an average 10% annually on the money, she'd have $1 million saved by the she turned 63.
You may be able top $1 million even sooner by taking advantage of your employer's 401(k) plan. Some employers will match your contributions to a 401(k) account -- that's free money. So, in the above example, let's say the woman's employer gave her a 50-cent match for every dollar she invested. She'd reach the million-dollar mark by age 59. If she increased her contribution to $300 a month and netted a match on top of that, she'd be worth a million by the time she turned 55 -- and she hardly had to lift a finger to pull it off.
Get to know more about the saving and 401(k), check the article:
Calculate what it'll take for you to hit a million bucks
The Quarter-Life Retirement Plan
Yes, You Can Make a Million
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