Starting out: Reconciling debt and opportunity for young adults

3 MIN READ | #blog

“Wherever you go, there you are” is a classic reminder to live consciously and fully in each moment. In terms of financial confidence and well-being for young adults, that advice makes excellent sense as well.

Wherever you are in life — starting out, building a family, advancing your career, or contemplating retirement — there are tools and support to help you manage the specific financial challenges you face.

This article kicks off a four-part series on relevant financial resources for each stage of your life, and how they can be leveraged to improve your financial confidence and help you succeed now and in the future.

Fresh from school and just beginning their careers, many young adults struggle to reconcile debt and opportunity. On the one hand, there are student loans to pay off at a time when your salary may barely cover basic necessities. On the other hand, the world beckons and promising career and social opportunities may involve considerable expense — clothes, moving, entertaining, advanced education — to pursue. Here are some ideas and tools to help manage the financial complexities of just starting out.

Focus strategically

What’s important to you? Write down your short- and long-term goals — six months, one year, three years and five years out. (Don’t worry, you can adjust them later as your goals change.) Committing your dreams and responsibilities to a journal or computer has a marvelous way of clarifying your thoughts.

Budget realistically

Once you know what you want to accomplish, set up a budget to get there. Confident Planners, working Americans with the highest financial and emotional confidence scores, put above-average emphasis on having a realistic plan and sticking with it. Follow their lead. A successful budget will help enable you to meet your financial obligations and grow your bank balances as you work towards achieving your life goals. In addition to taking care of everyday expenses, try to pay down outstanding school loans — a little each month — and begin to build an emergency fund to help protect yourself from the unexpected.

Save religiously

Now is the time to build a world-class savings habit. You have many years ahead of you to build wealth through the incredible power of compounding. Begin saving as early as possible and avoid withdrawing earnings. Set up automatic savings at your bank. If your company has a 401K match program, take advantage of it. Also, consider disability insurance to help protect your income stream, and look into the cash value growth advantages of whole life insurance.1

Get help

Many young adults think they don’t have enough wealth to consult with a financial professional. The opposite is true. A financial professional wants to help you make the most of what you have now and lay a strong financial foundation for the future. It’s an opportunity to have a dialogue with an unbiased not-your-parent expert who will help you step back and see the big picture of your financial life. What’s the best way to prioritize debt reduction? Which income-building strategies are right for you? Could you use the benefits of protections like disability or life insurance? How much of your paycheck should you allocate to retirement savings? The answers to these and other questions will literally shape your financial future.

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1 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information