Young adults paying monthly expenses, while managing student loan debt and planning for the future, may wonder where they should start?
One Step at a Time
Achieving financial goals is possible – just take it one step at a time. Everyone's situation is different, but the following steps could lead to a sound financial foundation – now and in the future.
Examine expenses. Make a list of living expenses and make cuts where possible – renting a cheaper apartment or canceling the cable can free up extra cash quickly.
Create an emergency fund. It's smart to save enough to cover at least three months' worth of expenses – but that can seem daunting. Start by saving up at least a nominal amount (say, $1,000) before moving on to the next financial goal, and gradually build the rest over time.
Pay off student loans and other debt (excluding mortgage). Focus on paying off one debt at a time while making minimum payments on the others. Repaying the highest-interest debt first is often recommended – but paying off a small debt completely might give you a boost of motivation.
Save for retirement. While paying down non-mortgage debts, start planning for the future. Contribute whatever you can afford at first, and gradually add 1% to 2% more until you are contributing 15% of your household income.
Work on that mortgage. Once other debts are repaid and savings are rolling in the right direction, pay extra on a mortgage or consider home ownership by saving toward a down payment.