Venturing out on your own for the first time is a challenging prospect for many young people. According to a recent survey, one in four young Americans lives with a parent or other older relative. These financial tips from The (Austin)tatious Blog can help protect your financial independence as you strike out on your own.
1. Recession-Proof Your Finances
Establishing a life independent of your parents for the first time is challenging under the best circumstances. It is even more challenging when facing economic uncertainties. Protect yourself from a potential recession by creating a budget and sticking to it. Reducing unnecessary expenses can help you build an emergency fund to get you through difficult economic times.
2. Save for a Home
Building equity by purchasing a home instead of paying rent can be a good way to start building a financial foundation. However, rushing to buy a home without a sufficient down payment could be a mistake.
A down payment is a percentage of the overall purchase price of a home that you pay upfront rather than financing. For example, if you purchase a home that costs $200,000 and you put 20% down, then you pay $40,000 upfront and finance the remaining $160,000. Different loan types have different down payment requirements that typically range from 3.5% to 20%. The less you put down on your home, the more money you must borrow. This increases the total cost of your mortgage.
Start saving for your down payment now. In addition to decreasing the amount you must borrow, a larger down payment can qualify you for better terms and a lower interest rate on your mortgage.
3. Set Up Automatic Bill Payments
Protecting your credit is important because it affects many aspects of your life. A poor credit score makes financing harder to get and more expensive and may make it more difficult to obtain insurance and employment and qualify for some types of services, such as cellular telephones.
Making on-time payments is a requirement to build good credit. Avoid late and missed payments by setting up automatic payments on all your bills. Many companies offer this service, and for those that don’t, you may be able to use an automated payment service through your bank.
4. Obtain a Low-Limit Credit Card
Credit cards can be a double-edged sword. Obtaining a low-limit card, using it, and paying off your balance every month can help you build credit. However, if you charge more than you can pay off, you can tank your finances, so only do this if you can be disciplined.
5. Don’t Pay With Cash
It can be easy to lose track of how much you are spending and what you are spending it on if you pay for things in cash. Instead, use your credit or debit card. If you use a credit card, this also provides you with some protection against fraud. You can make your finances even easier to track by importing your bank and credit card statements into a budgeting app.
Establishing financial independence is a challenge for many young people. However, taking steps, such as saving money for a down payment on a home, can help you build a strong financial future by establishing good spending habits and building your credit.
Kurt Brown knows that some of the best adventures happen off the beaten path. Unfortunately, those experiences are not always well-documented and, as a result, helpful information is not always easy to find. That’s why he created Travel Tip Tank. The website offers travel tips visitors won’t find anywhere else. Say thanks to him by checking his website out if you liked this article.
The views and opinions expressed do not necessarily represent that of The Austin Blog.