Financial freedom can occur at any age. People don’t have to wait a lifetime to be financially secure. Whether you are neck-high in debt or just starting out in life, you may be closer to financial freedom than you think. Consider these money tips for young adults to follow.
Bad Debt
Bad debt should be avoided at all costs. Bad debt means that a borrower incurs debt for the sake of purchasing an item that has a depreciating value. In essence, it means losing money in the long-run. If bad debt can’t be avoided, try to make it work out in the best possible way. For instance, seek ways to lower interest rates or try to recover some of the money lost. For instance, try carpooling if bad debt cannot be avoided in purchasing a new vehicle. It’s important to understand the difference between bad debt and good debt because debt can be a good thing.
Good Debt
There is a way to make debt work for the borrower. It comes with buying a home or another purchase because it can be used as leverage. Good debt basically means that the borrower uses debt to increase their wealth. For instance, taking loans for a college degree could work out if the borrower is able to pay off the loans quickly with money earned from the job the degree helped to obtain. Even credit cards can be used in this manner. From something as minor as receiving rewards from credit cards to something larger, such as obtaining inventory to sell for a profit, credit cards can help people to increase their cash flow.
Credit
It’s not wise to avoid credit cards altogether. People need a certain amount of credit for virtually everything they do. Whether they want to get an apartment, apply for a job or purchase a new vehicle, credit invariably becomes part of the equation. People think that avoiding the use of credit cards is smart financially, but this is a huge mistake. Not having good credit or any credit causes financial institutions to charge more interest. A borrower is considered “risky” if they do not have a good credit score.
Use Cash
Small houses can be purchased for $20 thousand USD. For a single individual or one who can live peacefully with another in close quarters, this is an excellent arrangement. Not only can the cost of housing be saved on, but utilities will be less in a small space. Also, using cash enables purchasers to negotiate for a lesser price. Not many people can walk into a dealership and request thousands off a new vehicle, but dealers are more likely to take a deal where they lose thousands immediately instead of spreading those extra thousands over the course of several years.
Understanding Finances on a Broader Scale
It’s well worth it to do some reading on global economy, debt, inflation, retirement, types of accounts, interest rates and other topics relating to finances. The old way of thinking about saving for retirement no longer pans out. Accounts can’t collect the same amount of interest to keep up with inflation. This means that people have to continue increasing their cash flow to maintain financial independence. It also means that if someone wants to invest in gold, they need to understand how to invest. It doesn’t make sense to tie up a couple thousand dollars in gold and sell it in a year because it is not profitable. In short: staying informed will help with financial freedom.
Above all, think about what you want in life, and map that out. Make financial goals for yourself. Money tips for young adults will only carry you so far. You need to educate yourself, make a plan, and apply what you have learned to create success.
