If you are considered a young adult, congratulations! You might say “what does that mean?” Well, in simple terms, it means more responsibility and freedom to be you! You can now decide where you want to live, what job you want, and what to buy because you have worked hard the past few years to become independent.
In this section, you will find numerous links and answers to the questions that you may have about your next steps on the path to financial independence and self-sufficiency. You may already have the car, the apartment, school loans and maybe even a little debt, but we want to give you the tools to continue to be, or become, financially successful and even more prosperous. So, take advantage of these wealth building tips, as you enjoy your young adult life!
Set up savings accounts. Yes, accounts. Set up one account that you can easily access in case of an emergency and another in a high-yield savings account like a money market account. You should have enough money in your savings account to cover at least three to six months of your monthly living expenses. The higher-yield savings account can be linked to your checking account, but it may take up to two or three business days for a transfer to take effect. This money should only be used for unexpected emergencies like a job loss, medical expenses, or car repairs. So, save as much as you can by making it a habit to place 15% or more of every paycheck into your savings accounts by treating it like a bill. Contact your local bank or credit union to get more information about which type of account is best for you.
You can also visit ingdirect.com to get more information. If you are in college and need tips on how to save money, visit the collegescholarships.org web site.
This is a simple formula to remember to have a debt free life. College in particular is a place where most young adults experience their “run-in” with debt. Credit cards are marketed as free money and a way to be independent. 
However, if you are not careful, this can lead to serious debt. As soon as you turn 18, some credit card companies may drool at the chance of getting you caught in a web of debt if you are not careful. Credit card representatives go to your sporting events, your college campus, and many other young adult events to seek you out. They have cool t-shirts, music downloads, and mini basketball hoops for you for free! All you have to do is sign on the magic dotted line to open a credit card account. Once you sign, you may be promised free money up to $200 or even a couple thousand dollars to spend whenever you like as long as you agree to make a minimum monthly payment.
So, you take the “free” offer and use the credit card to put gas in your car, buy new clothes, go out with friends, and most importantly, not ask your parents or friends for money. But then the bill comes, and the debt has accumulated because you only made minimum payments. Perhaps some of the payments were late, resulting in extra charges on your “free” credit card. You thought money was “tight” before the card; now money is even “tighter.” You now have debt. How do you avoid this situation? Simple, follow these five rules:
- Be smart about your credit card choice. It is important to have one credit card to establish your credit, but don’t just sign up for a card to get the “free stuff.” Do your homework. Before you sign on that magic dotted line, make sure you know:
- What the interest rate is and whether it is fixed or variable.
- How interest is calculated.
- If there is a grace period, and if so, for how long.
- If there is an annual fee, and if so, how much is it.
- What other fees are assessed, like late charges, over-the-limit fees, cash advance fees, etc.
You can find all of this information by reading the fine print on the disclosures provided by the credit card companies. After you have finished your homework and if you happen to select a card that offers “free stuff,” by all means take it. Having GOOD credit will allow you to rent an apartment, buy a car, or buy a home. To learn more about credit card features and tips to help you choose the right card, visit the federalreserve.gov web site.
- Always pay off your credit card balance or at least make more than the minimum payment every month. If you need to use your credit card, limit your use to what you can pay off within 30 to 60 days. For example, you need to pay a bill or buy groceries and you are short on cash. So, you use your credit card. Make sure by the end of the following month you will be able to pay the balance off. Remember, every month you are charged interest on the outstanding balance. The lower your credit card balance, the better off you will be and the more money you will have in your pocket for other priorities. Manage your debt. Don’t let your debt manage you! To learn how to use credit wisely, consider taking our Building Your Wealth online course.
- Sign up for credit card alerts. With alerts, you can stay informed and in control of your credit card account. There are a number of alerts you can request like payment due reminders, when payments have been posted to your account, when your credit card drops below a certain amount, etc. You can sign up to receive alerts as automated phone, email, or text messages. These alerts will help you manage the balance on your card. Not all credit card companies offer this service, so call or visit their website to find out what services are available to you and whether there are any associated costs.
- Set up automatic bill payments. Having an automatic payment set up through your credit card company or bank helps guarantee your payments will be paid on time, as long as you have the available cash in your bank account. All you have to do is contact your credit card company or bank representative to set up the automatic payments. Having your minimum payments automatically deducted from your account prevents late fees and extra charges. It also helps maintain higher credit scores. However, remember that if the money is not available in your bank account, it can result in overdraft and late payment fees and other penalties. Depending on your credit card balance, the minimum payment may be higher than what you have budgeted. Always review your monthly credit card statement so you know how much the payment will be, and make the necessary adjustments ahead of time.
- Remember, credit cards are a convenience—not an extension of your income. Credit is a loan that you have to pay back plus interest, so use cash whenever you can to avoid interest and penalties. If you know you are a spender, consider setting up two checking accounts with your bank, one for bills (we’ll call this the Life Account) and one for shopping or entertainment (Fun Account). Use your Life Account for what you need, utilities, food, transportation, and housing. Use your Fun Account for shopping, the movies, and splurges. Set aside a little bit of money each month to go toward your Fun Account and it will help you manage your urges to use credit cards only when you need to or when you can pay off the account in full. Credit cards are best used for special or unexpected expenses, like car repairs, books for college, etc.
If you really want to keep your finances in order consider setting up a budget. You can start by tracking your expenses to see what you spend your money on. Then, calculate your monthly income and expenses. Your income should be more than your expenses. If it is not, you will need to figure out ways to reduce your expenses. To learn more about creating a budget, consider taking our Building Your Wealth online course. These simple steps can help you maintain a debt free lifestyle rewarding you with future opportunities to let your impressive credit score shine. When you think about pulling out the credit card from your wallet, think about your future and the benefits of a debt-free and prosperous life.
Yes, it was worth it! You have a great education and a degree or two. But now the grace period is over and the bills are coming. You may have a federal, state, or private loan, or a combination of them all. Each has its own interest rate, payment procedures, and terms (or rules). If you don’t know the type of loan you have, you may be able to find out by visiting the National Student Loan Data System web site. Otherwise, contact your lender. Student loan management can be overwhelming, but if you follow these tips you can become an expert.
- Read your mail from your student loan lender. All lenders will send a statement or announcement of repayment in the mail. It will explain how much you owe, the interest on the loan, your monthly amount due, and any options that may be available to you.
- Set up automatic payments. This may mean a lower interest rate over time. That’s right. If you sign up for automatic payments through your lender, you may be able to lower your interest rate after meeting any requirements. Most lenders that offer this benefit require you to have automatic payments for a year or more and have a certain dollar amount of school loan debt in order to get a lower interest rate. Check with your lender for full details and availability of this benefit.
- Consolidate your student loans to save money. Depending on the type of loans you have, you may be able to consolidate them resulting in just one lower payment. If you have multiple loans with different interest rates, thoroughly research your options to determine if a consolidation loan will save you money. To learn more about consolidating your student loans, visit the finaid.org web site. If you are able to consolidate your loans and this consolidation results in a lower payment, consider paying more than the minimum amount due. This reduces your principal faster and helps you save money in the long run.
- Find out if you are eligible for a deferment or forbearance? If you are thinking about going back to school, have lost your job, or experiencing some other financial hardship that may prevent you from making your loan payments, a deferment or forbearance may provide you with temporary relief. You may, depending upon the type of your loan, apply for a deferment. If you qualify, this means you will not need to make loan payments during the approved time of nonpayment. In some cases, interest charges may not accrue. There are a range of deferments that may be available for going back to school (graduate school is sometimes not approved), getting a public service job, experiencing financial hardships, or unemployment. Forbearance is a temporary reduction or postponement of loan payments during an approved time period for an acceptable reason. You must contact your lender to arrange for a deferment or to apply for forbearance. Most lenders have these options, but every loan is different. So, contact your lender or search their website to determine what options may be available to you.
- Give back and pay off some or all of your student loans. Working in certain public service jobs like teaching, nursing, working as a state employee, working in low income neighborhoods, serving in the armed forces, or even volunteering may get you free money. Typically, all you have to do is sign up and agree to work in the approved position and/or designated area for a specified number of years. In exchange you get some type of assistance in the repayment of your student loans. Some of these positions may even pay off some or all of your student loan debt after you have met the work-related commitment or qualify you for other types of loan forgiveness. It’s a win-win situation! You get to help your community, give back to others, and possibly reduce your student loan debt. There are many options available. For more information, visit the money-zine.com web site.
- Make extra payments on the principal. This is a simple way to pay off your student loan faster. The principal is the loan amount that must be repaid on maturity (the original amount you borrowed). Lenders determine the interest that is charged based upon the principal amount owed. When you make an extra payment, write directly on your check and the payment coupon that the payment is to be applied to the principal. A lower principal balance means less interest you will have to pay.
- Keep your contact information updated. Don’t forget to inform your lender of new contact information and name changes.
Finally, it’s time for a real car! That car from high school or college may have made it through late night fast food drive-thru runs, spills, oil changes, flat tires, and long road trips, but now you want a new car. 
Before you think about buying a new car, weigh your options. If you buy a brand new car, as soon as you drive it off the lot, the value of the car decreases. We’ll give you a quick rundown here, but for more detailed information visit our Buying a Car webpage.
Get a Car You Can Afford
Make sure you get something you can afford. It’s okay to compromise if you can’t get everything you want. For example, a navigational system added to a new car could add thousands to the sticker price. But to save money, you can get one installed on your own after the purchase for a few hundred bucks.
There are three ways to get a car: buy new, lease, or buy used. A new car will get you the latest technology, style, no previous owners, and of course that sweet “new car” smell. A used car can get you the car you really want but may not be able to afford brand new, with some previous owners, but possibly the best value for your money. A lease will give you the option to drive the car you really want for a specified period of time without paying for or financing the total cost of the car. Monthly lease payments are typically lower than car loan payments on a purchase. To learn more about leasing versus buying a car, visit the LeaseGuide.com web site.
Before you buy a car, do your research on websites like kellybluebook and vehix.com to get the full picture of your options. Also consider using consumer automotive guides like edmunds.com, howstuffworks, and JDPower.com for information about performance records, reliability reports, and consumer reports of the make and model of the car you are considering buying. Most importantly, make sure you choose a car that you can afford.
Save Up and Pay for Your Car with Cash
The best way to have a smaller car payment (or no payment at all) is to buy with cash. Save up for a year or more, ask your parents and relatives for donations towards your car, take public transportation, or even consider getting a second job so that you will have as much cash as possible for a down payment or full payment. If you already have a car and it is paid off, continue to make “car payments” to yourself and put that money in a high-yield savings account for when you are ready to purchase your new car. You can also look into trading your car in or selling it if it is paid off, and then apply that money towards your down payment.
Don’t Forget Car Insurance
You found the car you like, so now you need car insurance. Depending on the state you live in, you may be required by law to have insurance even before you drive the car off the lot or within a certain time frame of the purchase. Some states are more stringent than others about coverage amounts. We suggest that you check with your car insurance provider to determine the minimum coverage you will need. Your driving record (speeding tickets, DUIs, etc), age, gender, zip code, credit history, and the year, make, and model of the car are factors that insurance companies may use to determine your insurance premiums. You may be eligible for discounts that could potentially lower the cost of your insurance premiums like being a good driver or a student driver or having a car alarm. For more information about reducing your insurance coverage, visit the pueblo.gsa.gov web site.
Depending on the type of car you buy, your car insurance may cost hundreds to thousands of dollars on top of your monthly car payment. So, when you are figuring out how much you can afford to pay for a car, don’t forget to include the cost of insurance. After you have decided on the kind of car you want to buy, contact your car insurance provider to request an insurance quote before you buy the car if possible.
Oil Changes Every 3,000 Miles
Stay on top of your car maintenance schedule to have a healthy and happy car. Check your owner’s manual for recommended services. Typical maintenance generally includes:
- Scheduling routine oil changes.
- Replacing air filter.
- Checking fluid levels; filling them as necessary.
- Having your tires rotated and making sure they are properly inflated.
- Getting an alignment.
Most of these services can be done during an oil change. As your mileage increases, your car will need more maintenance such as brakes, a tune up, and new tires. If you purchased a new or used car, some of the routine maintenance may be covered with new promotions and warranties. Keep the additional coverage and extended warranties in mind when purchasing a car and determine what makes sense for you financially. Although it will add to your monthly car payment, additional coverage or an extended warranty may help reduce your overall maintenance costs.
Dorm life is over. No more roommates, cleaning after others, dealing with family, or sharing a bathroom. Now it’s time for you to get a place of your own in the area you want. Finding a place to live can be just like shopping for a car. You want the right location, amenities, safety, parking, and things that cater to your lifestyle. So, let’s go through what you may need to assure a great first time living on your own experience.
Location, Location, Location
It is important to find a place to live that is near or next to your job or school. Think about your commute time, public transportation, freeway access, grocery stores, parks, and whatever else your lifestyle calls for and try to be as close to all that you need as possible. This will help you save money and time. If you own a car, think about whether you want to park on the street or in a designated parking spot. If you have frequent guests, consider their parking availability as well.
Amenities May Save You Money
You may want to think about what amenities you would like to have in your ideal apartment. Would you like a pool, laundry area or in-unit laundry, spa, game or movie room, gym, courtyard, or concierge services? Well, all of these could potentially be available to you, depending on where you choose to live. If you choose an apartment building with an abundance of amenities, you may have to pay higher rent, but it may help reduce your overall expenses by not having to pay for a monthly gym membership, a place to entertain friends, or for each load of laundry. What you need is up to you, so make a list and shop around.
Signing the Lease
Read the lease. The lease has all the information you need about the amount you pay every month, when rent increases will occur, having pets, smoking, breaking your lease, maintenance, noise policy, etc. Signing the lease means you are agreeing to every single word in the contract. In some cases, you may need a cosigner, a person who is 18 or older that may have a stronger credit history and be more financially stable like a parent. This person may not be an actual tenant or pay the rent every month, but would be co-responsible for covering your rent expenses if you are unable to.
Paying your rent on time is important. Anytime you rent a new place, the owner or property manager may do a credit and rent history check on you. He or she can see any evictions you may have had or speak to any previous landlord to determine if they should rent to you. These checks may also help determine how much your deposit will be. In order to move into an apartment, you will likely need to pay a deposit and sometimes pay first and last month’s rent. So, before you decide to move out, make sure you have enough money saved. And, don’t forget about moving expenses. To help save money on your moving costs, offer to buy your friends a pizza dinner if they agree to help you move and remember to return the favor when they move. Some apartment buildings may have move in specials, so don’t forget to ask about them.
Renters Insurance and Utilities are also Things to Consider
Renters insurance covers theft, fire, and damage to your property in your apartment. There are numerous plans, so you can pick the right one for your life and budget. Some landlords may even require that you have renters insurance. If you already have car insurance, you can potentially save money by adding renters insurance to your existing policy.
When you are factoring your rent costs, make sure you include your utilities. These may include cable, gas/electric, water, cell phone or landline, internet, and garbage. Some rental agreements may cover water and garbage, and others may cover nearly all your utilities. Most of your utilities will stay around the same amount from month to month, depending on the season and usage. If you can afford all the cable channels then enjoy, but you should pay for what you really watch. Same for the phone, if you need a landline to buzz guests in, keep the service as basic as possible. If you can buzz guests in with your cell phone, that will help you save money by not having to pay for two phone lines. And if possible, try to work with a provider that offers discounts for bundled services like cell, cable, phone, and Internet to save you money.
Roommate…Again?
If you would like to have a bigger place or rent a home that could potentially be more expensive individually, but affordable with a roommate, consider it. There are numerous postings for roommates on sites like roomates.com that may help you find a good roommate. Perhaps you have a friend who is looking to move too that you could live with. You can also look for a roommate by posting an ad on a safe website. Keeping your options open can help you save money. Having a roommate may be a compromise, but you may be able get a larger place and still save money by sharing the cost of living expenses. You can look for places that have two or more bedrooms and possibly your own bathroom for more privacy.
You have probably started your first job or perhaps you’re looking for the right one. Either way, chances are your expenses are still manageable, which allows you to save. It is important to save money and prepare for your future. Make a habit of saving 10 to 15% of your income. This will help you prepare for your retirement. Here’s how you can be prepared for those rainy days or better yet those sunny days at the beach.
Your Job May Offer Retirement Benefits…Take Advantage of Them
The younger you are the better when it comes to saving for retirement. Think of it this way, the earlier you start saving for retirement, the earlier you may be able to retire. Although they are not required to, most employers offer retirement savings plans, such as a 401(k). If your employer does, you should consider participating in their retirement savings plans. Some employers may also match a percentage of the dollars the employee saves each year as an employee benefit. This means they contribute money to your retirement account, which is “free money.” You can adjust how much you want to go into your retirement savings plan as your financial situation changes. Make sure when you change jobs you transfer your funds to another retirement account if you do not have the option to keep your funds in your previous employer’s retirement plan. Remember to do this each time you change jobs, so that you do not lose or forget the retirement funds you have. If your employer does not offer a retirement savings plan, you can talk to a representative at your local bank, credit union, or mutual fund company about setting up an individual retirement account or IRA. You can also read our Healthy Retirement webpage for information. And, try our Retirement Calculator to see just how much you’ll need to retire and enjoy those sunny days on the beach!
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