Do You Need A Financial Makeover?

After reading a profile on personal finance blogger, Ramit Sethi, from I Will Teach You To Be Rich, I discovered a great list of tips he recommends for young adults to get started managing their money. For some people, this advice will be a complete makeover of how they have handled their finances in the past. For others, it will be a list of things that they’ve already been doing. I’ve decided to evaluate how I’ve been doing to see if I’m in need of a financial makeover or if my financial makeup is just fine.

Figure out how much you’re spending per week and set up a budget.

This is one of the first things I did after working at my new job for about a month, except I calculated an estimate of how much I was spending per month. Using this estimate I was able to estimate how much I expect to spend in a year on the bare necessities — rent, food, gas, etc. I always round up when estimating my expenses. This leaves some room for error and provides a buffer for unexpected expenses that might come up and potentially bust your budget. After crunching the numbers, I determined that paying back $10,000 of my student loans by the end of the year is completely feasible as long as I keep on track.

Make sure you’re not paying fees on your bank accounts or credit cards.

This one seems like a no-brainer, but there must be people out there who are paying fees. Otherwise, banks and credit cards wouldn’t keep these fees around. My advice is simple — switch to a bank or credit card without fees if you’re currently paying fees.

Get your credit report.

I’ve done this for the past few years, and it’s a great way to inspect your personal financial record. Once every 12 months, you can get a free credit report from each of the nationwide consumer credit reporting companies at AnnualCreditReport. Checking your credit report will allow you to see if there is anything suspicious going on with your accounts and hopefully fix these issues before they get out of hand. Getting my credit report helped me discover a credit card that I don’t remember receiving or activating. Even if you don’t activate a credit card, it still appears on your credit report. Fortunately, that line of credit had not been used, and I promptly closed it.

Open a high-interest bank account.

Having previously written about why every student should have a high-interest bank account, it should come as no surprise that I opened one of these a few years ago. While the interest rates are pretty low at the moment, it’s still something every college student should have in my opinion. Whether it’s extra loan money, earned money, or money from your parents, keep your extra funds in a high-interest bank account and earn some extra cash instead of letting it sit in a regular bank account.

Establish a savings goal of 20 to 30 percent of your income, if possible.

With the amount of student loans I have to pay back, saving 20-30% of my income isn’t feasible at the moment, unless I pay back my student loans more slowly. This brings up the issue of whether I should pay off more debt now or invest more now. From the research I’ve done so far, the best option seems to depend on each individual situation. I have some more numbers I need to crunch before I make my final decision, but at the moment, it seems like getting my student loans paid off is the better option for me.

Open an investment account at a discount brokerage.

I actually did this when I was still working on my undergraduate degree. The sooner you start investing, the better. Here’s my first investing story.

Fully fund 401(k)s and Roth IRAs.

Similar to the 20-30% savings tip, fully funding my 401(k) and Roth IRA isn’t feasible right now. While I can’t afford to max out my contributions this year, I’m certainly not going to pass up some free money. I’m doing this by contributing at least enough into my 401(k) to get the maximum company match.

Well, I feel like my financial makeup is in pretty good shape, although I could use a touch up here and there. I’m currently not able to save and invest as much as I’d like, because I have student debt to pay off. However, I’m excited, because I’m on track to knock out half of my student loan debt by the end of the year. Now that I’m done putting myself on the hot seat, it’s time to turn the tables.

Do you need a financial makeover?

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