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Nine Financial Decisions That Will Benefit You Later in Life


It’s a fact that many of us start our careers with an accumulation of debt from college loans. However, for many African Americans, the numbers are much greater. In fact, the differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation—almost twice as much as their white counterparts. So, while most Americans could probably be better at managing personal finances, not having a specific plan can be financially devastating for many black professionals because they are starting at a disadvantage. However, there are ways to get to a more solid foundation, and BCT Partners wants to help people get there.

1. Save more

We know that’s not a revolutionary concept, but it's a fact that you will have more if you save more. Many of us don't have a lot of discretionary income, but that doesn’t mean that we can’t find a few dollars to put away every week. Even if you have to start small, do it. That means you should put your money in a company-sponsored 401k plan or start an IRA. If you can, maximize the amount you invest to take advantage of amortization and company matching. You may feel like you do not make enough to save. However, when you invest your dollars, it also diminishes taxable income, so the money you would have paid in taxes will go to your retirement income. If you’re 50 or over, you can put more aside, i.e., $7,000 total in traditional and Roth IRAs ($1,000 more than younger workers) and up to $26,000 in a 401(k) or similar employer-sponsored retirement account ($6,500 more than younger workers). Most company plans also include free counsel from an investment firm representative, so seek advice from that professional since he/she can be a valuable resource.


2. Create a budget

As dull as it sounds; this is the best way to live within your means. Sit down as a family and go through every one of your non-negotiable expenses like rent or mortgage, electricity, etc., then discuss your savings strategy and miscellaneous expenses. It will be challenging at first, but eventually, it will get more comfortable, and you'll feel better that you know how much is coming in and going out each month.


3. Eliminate debt as quickly as possible

Pay attention to interest rates associated with your debt and aggressively pay down debt that carries the highest interest because costs will accrue more rapidly for the higher-rated debt. Getting back to that student loan debt, start with a plan right away as that interest will accrue quickly. This article by Forbes offers some excellent advice for ways to refinance a loan and other ideas that can help you pay your loan off more quickly. Now that you have a plan for your student loan debt, don't get into trouble with your credit cards. Pay your credit card in full each month – We know this is easier said than done, but when you look at the amount of interest you pay even for carrying a balance for one month, it will make you sick. One of the easiest ways to set a limit is to use only one card. And, shop around and pick a card that has the most advantages, whether it's cash back, a robust rewards program, or lower fees. Using multiple cards is the fastest way to get yourself in trouble because it's easy to overspend when using more than one.


4. Monitor your credit scores

A lower credit score can mean paying higher interest rates on credit cards, mortgages, other types of loans, etc. Sign up for a credit monitoring service so that you can spot a problem quickly. Sometimes an elementary mistake like forgetting to pay a bill can take a significant toll on your score. There are record low-interest rates right now, so be sure to take advantage of them to improve your current credit score and financial stability.


5. Don’t buy just to buy

It’s effortless to make useless purchases. That's why many people don’t have room in the garage for their cars anymore. Use the one in/one out rule. If you buy something for yourself, such as clothes or something for your home, only buy it after you have decided what you will eliminate through a charitable donation. First of all, it will prevent you from accumulating too much stuff, but it will also force you to think about the purchase long enough to determine if you need it or not. Sometimes, the fun can be just in the looking. For example, if you’re shopping online, put the item(s) in your cart and keep them there for a few days. If, after that time, you still really feel that you need it (and it’s within your budget), then buy it. More often than not, you’ll talk yourself out of it before you make the purchase.


6. Buy a used car

It’s a fact that most cars are worth less the minute that you drive them off the lot. Very few vehicles will ever appreciate, so why buy a brand-new car when you can often get a certified used car that will be just as nice but a lot more affordable. The difference in buying new versus buying a two or three-year-old used vehicle can often be thousands of dollars in savings. It doesn’t mean that you have to buy a clunker either. Most luxury brands have certified pre-owned cars that you can get with some a warranty attached. If you can, save up to pay cash for a vehicle to avoid high finance charges.


7. Make sure you’re adequately insured

It's hard to think about investing in a life insurance policy if you are younger and healthy, but that’s the precise time you should do it. You will get a much better rate by buying one early as the insurance company has much more time to make back their money. It can also be viewed as an investment because you can often cash in an insurance policy or even start getting monthly or yearly dividends if you have paid it off. Check to see if your employer has a plan because that could cost less, and you might be able to take it with you if you leave the company.


8. Invest

Investing may not seem possible right away but don't dismiss the idea. Small amounts invested for more extended periods can yield remarkably high rewards. Once you are on a more solid financial footing, start planning for ways to make that discretionary income grow faster. Although it might seem risky, the stock and real estate market long-term outperform many other wealth-building strategies. You don't need to invest in individual stocks because there are other options to consider, such as mutual funds, real estate funds, annuities, etc. It's possible to do all the research on your own, but it's usually more efficient to hire a financial planner. Ask for suggestions from friends or family as you want to make sure you find the most qualified person. If you do find someone on your own, ask for references and check them. If possible, speak with some of their clients or look for reviews online to get the straight scoop before entrusting them with your money.


9. Build multiple streams of income

Another way to become financially independent faster is through passive money-making opportunities. There are already some interesting ideas out there, so you don’t need to reinvent the wheel. That said, they all require some effort and money upfront with the potential of making passive income in the future. The most important thing is to do your homework. Assess what your risk profile is first and then decide the best option for you. No business investment is completely risk free so go in with your eyes open. For passive income ideas, click here.

In summary, most of us will not be able to retire on social security alone. Therefore, it's essential to start planning when you're younger and make decisions to help you live comfortably later in life. Please take these tips to heart and you may just end up as the next millionaire next door!


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