May 19, 2012

Life's financial hurdles

For many young people, graduating from an institution of higher education is one of the biggest steps toward adulthood that they have ever made. But what happens when it’s time to go off the beaten path? Navigating the job market, making major purchases such as a car and a home, and figuring out how to pay off all of your debt can be overwhelming at first. But with a little planning and some reflection on what you would like to achieve financially, you’ll be able to clear life’s financial hurdles. Here’s how.

Student loans. This is one of the biggest obligations you’ll have to shoulder as a young adult, especially now that the costs of college have risen dramatically. However, it’s important to see the light at the end of the tunnel; you will most likely have options for how you want to pay off your debt. Some graduates choose to make regular monthly payments of the same amount, and others may choose a graduated payment scheme where they can contribute more towards monthly payments once they’ve found a stable job. You should also research loan forgiveness opportunities; some professions, such as jobs in the non-profit sector, may make you eligible to drop some of your educational debt without repayment.

Credit cards. While student loans are a good kind of debt (they are investments in your future self, after all), credit card debt does not fit this category. You should repay your credit card balances as soon as possible, but this is easier said than done. Some tips to help you keep your card balances under control include calling your card company when you fear that you won’t be able to make a payment and trying to negotiate a better interest rate. Many cardholders don’t know what opportunities they are missing out on because they never pick up the phone to talk with a representative from the credit card company. If you remain in contact with them, there’s a good chance that they will be more helpful in assisting you with payment issues. And for now, you can make sure that you don’t incur more debt by leaving the cards at home.

Mortgage rates. If you’re successful at managing your finances over the next few years, you may even find yourself in a position to buy a home of your own. Home ownership begins with a good credit score, so make sure that you check your credit report at least once a year. This will help you spot discrepancies that could hinder your financial progress. And saving up for a larger down payment can help you avoid years in interest fees as you pay off your home loan. The most important step of all, however, is to shop around for a lender. You’re applying for a loan, but remember, you should have some qualifications of your own that a lender should meet to gain your business. 

Buying a car.
Last, but not least, you’ll need a way to get to work and back so that you can increase your earning potential as a young professional. If you find yourself on the market for a new car, it pays to do some research before you go to the dealership. The more information you have about the car that you want to buy, the better your chances are of getting a good deal on it. Car salesmen are notoriously sneaky in adding in fees and raising prices, so remember to negotiate your financing separately from the price of the car. Or better yet, get financing from your bank or credit union before you go to the dealership to buy. This will make sure that you keep the upper hand in auto negotiations.

About the author: Michael Edmondstone is a personal finance expert who specialises in debt reduction. He also advises consumers to arm themselves with information using online resources such as Ratesupermarket.

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