The key to financial success
Starting out on your own can mean dealing with unfamiliar, even intimidating situations, especially when it comes to finances.
This guide explains the key to financial success and the way to avoid some common financial pitfalls, including falling into debt, incurring unnecessary fees and penalties, and putting off investing.
a financial foundation
if you get off to a good start, you’ve got the framework for a secure future.
One of the things you discover as you start out on your own is that making decisions about money—especially managing your money—plays an increasingly larger part in your life.
Things that you may have taken for granted when you were in school or living at home—everything from where you sleep and what you eat to how you pay your credit card bills—suddenly require a lot more time and energy than they did before.
What you may also start to realize is how much you need to know to make smart financila issues you’ll face, from banking basics to picking a credit card, from reducing your current taxes to creating a long-term investment strategy.
Day In And Day Out
Some of the financial questions that come up day-to-day can seem pretty minor. Should you be using a debit card or a credit card to buy your groceries? What’s the best way to share living expenses with your roommate?
Other issues can be more perplexing: Should you pay off your student loans to wipe out your debt? Should you work freelance so you’ll have time to pursue a project that’s important to you?
On an even bigger scale, you may be wondering if it really makes sense to be putting money into a retirement savings plan when you expect work another 40 years. And if you have a plan at work, should you also be putting money into an individual retirement account—an IRA?
banking basics
it’s hard to get by without a bank account.
When you think about life’s necessities, finding a bank probably isn’t at the top of your list. In fact, the idea of putting a bank in the same category as having a place to live and enough to eat may seem downright bizarre. But unless you’re paid in cash, pay all your bills in person, and aren’t trying to save for the future, it’s hard to think how you could along without a bank, or its not-for-profit equivalent, the credit union.
The catch is that if you’ve seen one bank, you haven’t necessarily them them all. The services you can get, and what those services will cost you, vary significantly from bank to bank. So does the way you’re treated if you’ve got questions or problems.
The Big Picture
Banks are essential to making the economy work. They make loans, which you can use to pay college expenses, buy a car, or purchase a home. They issue credit cards, which let you buy products or services when you need or want them and pay for them over time. And banks provide financial services such as checking, savings, and investment accounts.
They money you deposit in your checking and savings accounts is an important source of funds that the bank uses to make loans. And the interest you pay on your loans pays for the interest you earn on your savings.
But banks don’t fill the role of financial intermediary just because it’s good for you, or for the economy. They want to make a profit. To do that, they charge you more to borrow than they pay you for keeping money in the bank. In fact, they rarely pay you for anything for the money you have in your checking account—which you can withdraw at any time—and very little on regular savings accounts, which give you similar access.
And they charge fees on most of these accounts to help cover the costs of processing checks, providing account statements, tellers, ATMs, and multiple branches, plus the costs of advertising and promotion to attract your business.