The early 20s is that age when many young people transition from dependence to independence. This is because many individuals who belong to this age bracket are getting their very first job. This new status comes with two things: financial freedom and financial debt.
Life Hack, a website that provides articles that break things down into a simple process, stated in an article that young professionals are targeted by credit lenders, who offer high-interest credit facilities such as credit cards and loans.
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Stay Away From Credit Cards
Buy now, pay later. This is a common hook that makes a lot of people to get a credit card. This, however, opens up the young professional to too much temptation of spending more than what they currently earn. Banks will say that you can rely on these cards when an emergency happens and that you need one so that you will have a good credit rating.
But remember that credit card companies are great at making money. They will try to convince you that getting a credit card is the best thing you could do for yourself. It’s all well and good until your billing statement comes in.
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Monitor your earnings and spending
Make it a habit to write down your budget allocation for the month. Remember that both income and expenses can fluctuate wildly. Create a budget plan by basing your financial allocations on your maximum estimated spending and minimum estimated earnings.
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Prepare for Unexpected Expenses
When making a budget plan, always assume the worst. Life Hack mentioned that things will break and prices in the market will rise eventually. It is wise to set aside a certain percentage of your income so that you can have something to fall back on when emergencies happen. Assume that things around you will need repair or replacement at some point or consider the chance that you will need to visit the hospital for a check-up or a medical procedure.
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Accept That You Can’t Afford Everything You Want
Even though you’re earning something substantial in your current job, there will always be things you want that are not within your reach at the moment. Accepting that we will always have financial limitations will help us rein in our urge to buy luxury items. It can also help if you think that expensive items won’t improve your life much.
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Stay Within Your Allocated Allowance
When setting up a budget plan, include a specific budget for your own allowance. It might be painful to see how little it is, but you have to stay true to your computation and follow it. Sticking to a budget might be hard but it is helpful in avoiding incurring debts.
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Save for the Things That You REALLY Want and Need
Instant gratification can force people into bankruptcy. So exercise patience. If you are eyeing an item, better save up for it instead of using your credit card to obtain it at once. What you don’t want is to be in debt for something that you can get later on and, possibly, at a lower amount as items tend to have lower prices the longer they stay in the market.
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Settle Your Debts on Time
It is inevitable to have debts. So make sure that you have a timeline on when you will finish paying them off. If left unsettled, these debts will quickly accumulate interests and bury you deeper than you thought. It is suggested that in order to reduce your debt, you can use your savings for those that need to be settled the soonest.