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.
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