At the same time, however, you need to be on the lookout for ways to protect your goals and your finances -â€" now more than ever. Here are 8 money-smart tips that can get you on the right track in your early 20s.
1. Bank on Living at Home
About one-third of last year's graduates moved back home with mom and dad for at least a year, and I suspect many of this year's class will do the same with a still-tight job market. While some critics of "boomeranging" believe it delays adulthood, I think it can be a wise way to shore up savings and get ahead of classmates -- at least financially. As long as you commit to an exit date and strategy, returning home after college can be a smart way to temporarily regroup and save money for your eventual transition to the real world, assuming you find some work during that time frame. If you do work and commit to saving 30% of your take-home pay (about the max you should pay for rent), in one year you could save about $15,000, assuming average starting salaries of $50,000.
2. Check Your Credit Report
Don't care about your credit history? You ought to: It can influence your ability to qualify for loans and credit cards, secure a rental apartment and even get a job. If you have student loans or a credit card in your wallet, you definitely have a credit history. Before you start opening up credit cards, visit annualcreditreport.com to get a free credit report (you can get one a year). You may not even realize that you have a credit card or two under your name -- perhaps you signed up for a card during freshman year just to get the free T-shirt, and then threw out the card. But those accounts are still active. If that's the case, don't close them; call the issuing bank and get more information about them. They may be worth keeping and using.
3. Stay on Top of Loans
Make your student loan repayment a top priority. Never miss a payment -- you could see your balance inflate, making you yet another victim of the student loan crisis. If you're having trouble paying them down, look into alternative repayment plans. For example, federal loan borrowers may be able to qualify for Income-Based Repayment Plans. For most qualifying borrowers, IBR loan payments are less than 10% of income.
4. Avoid Store Credit Cards
No matter how tempting the initial discount may be, kindly refuse the store credit card wherever it's offered. These cards have very low limits and high interest rates, making them pretty impractical and expensive to use. This was a hard lesson for me in my early 20s.
5. Steer Clear of Bank Fees
A college graduate told me the other day she thinks debit cards are scary because of all their fees. I explained that while debit cards carry fees, there are ways to skirt them if you understand the fine print. You can avoid ATM fees by using your bank's ATM machines or asking for cash back when you use your debit card at certain retailers. You can also avoid overdraft fees by opting out of overdraft protection.
6. Go Moonlighting
You have the body clock of a college student still ticking inside you, so why not bank on it? Freelancing on the side is the perfect way to boost your income and gain creative work experience -- some of which could even turn into a much bigger deal down the road. For me, my side gig in my early 20s was freelance writing, which turned into a book ... which helped get me this job, among others.
7. Watch Your Friends
The wrong kind of peer pressure -- the kind that insists on going out every night -- can do serious damage to your bank account. If you're a saver and all your friends are spenders, you may need to rethink your Saturday nights. Consider meeting your friends after dinner, or invite them over to your place for a BYOB. If you have a close friend that's a bad influence, let him or her know that you simply can't keep up. If they're that good a friend, they should understand.
8. Skip the Car
This, of course, will depend on your job and your location -- it's easier in downtown Chicago than in suburban Phoenix, for instance -- but many young adults in their 20s are driving less to save money. In fact, the share of auto miles driven by Americans between age 21 and 30 fell to 13.7% in 2009, down sharply from 18.3% in 2001 and 20.8% in 1995, according to the Federal Highway Administration.
Not convinced? Try these numbers: If you finance a car rather than buying with cash, you can wind up spending about $8,000 a year on payments, gas, insurance, maintenance and other related costs. Do that for half a dozen years, and stuff that money instead in a retirement account earning 8% every year for about 40 years, and you'd have nearly $1 million. Now does that sound like a tradeoff worth making?
Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new bookPsych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv and on Twitter/farnoosh
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