The following blog is by Sophia Bera originally published in her website Gen Y Planning.
I’m a big fan of automating your finances as a way to grow your wealth. After about 30 minutes of set-up, your money is whisked into different accounts, and you’re less tempted to spend your savings because you don’t really see that money.
But every year (or whenever you experience a big life change like getting married, having a kid, getting divorced, or getting a big raise), you should reassess how you handle your finances. What made sense for you a few years ago might not match your goals and needs today.
A pattern I often see is people who have been out of school and on their own for years, but they still handle their money the way they did in college. Maybe you’re totally happy with the status quo, but I still believe you should look into changing things up to give you options and flexibility in the future.
Here are three places to upgrade your life:
Your Bank Accounts
That student checking account served you well back in college. The bank had an ATM in the student union, the fees were pretty low, and the required minimum daily balance was manageable.
But you’re an adult now, with adult quantities of money. There are bank accounts that will reward you for that by completely waiving fees and offering a higher interest rate.
Most importantly, keep you checking at a different bank than your savings account.
And you do have a savings account, too, right? If not, set one up with an online bank like Ally. Online banks often pay higher interest rates, and having that money take a few days to transfer to your checking means you’ll spend it only when you need to.
Pro tip: You can even have multiple savings accounts earmarked for different things, like emergency savings, travel, or saving for a down payment.
Don’t keep your money in the same account you had in college. Upgrading your banking is a worthwhile investment of your time. If you’re wondering how much money to keep in your checking and savings accounts, check out this post that I wrote for Business Insider.
Also, if you’re a business owner or have a side hustle, I highly recommend you keep your business accounts separate from your personal accounts. It will make tax time much easier!
Your Credit Card
That no-frills, no-fee credit card with the low interest rate and low credit limit served you well when you were first learning to use credit responsibly. If you have excellent credit and a history of paying your bills in full and on time each month, you can get a credit card that works harder for you and pays you rewards in return
First of all, you probably need a higher credit limit, which will allow you to make the occasional major purchase without maxing out your card. This can actually help your credit score! One of the factors that affects your credit is the credit utilization ratio. If you routinely charge more than 30% of your total available credit, you could be dinging your score. A higher credit limit lets you pay for big-ticket items without exceeding 30% of your credit limit.
Second, you should be earning credit card rewards. If your old card doesn’t net you rewards points or cash back, you’re not maximizing your credit card spending. Imagine if your usual purchases resulted in one or two free vacations a year!
Rewards cards often have higher interest rates, an annual fee, or both. But both of those things can be worth it if you never carry a balance and the rewards you earn far exceed the cost of the fee.
Where You Get Your Financial Advice
In college, your main source of money wisdom was likely your parents. After all, they might have still been supporting you financially at that point. You might have just been beginning to access accounts they started for you, and funded, when you were still a minor.
Many new graduates, faced with things like doing taxes and setting up retirement savings for the first time, turn to their parents.
Consider seeking financial advice from different sources. Here’s why: your parents, awesome though they may be, can’t give you unbiased advice. They love you, they worry about you, and they might not be able to see you as the adult you’ve become.
Now that you’ve been financially independent for a few years, you shouldn’t feel like you have to tell your parents about every money decision you make. And if you’re married or in a long-term partnership, your significant other should be the only other decision-maker when it comes to your money.
Keep in mind that your parents possibly got their money advice from their own financial advisor. Your parents’ financial advisor might not be a good fit for your needs, either. If they don’t frequently work with younger clients, they might focus more on services geared toward people who are closer to retirement. They might offer outdated advice that served people well 30 years ago, but doesn’t take into account new financial products or the economic realities most Millennials face.
Seek out unbiased financial advice that fits where you are in life.
About Sophia Bera: Sophia Bera, CFP® is the Founder of Gen Y Planning and is a financial planner for Millennials. She’s passionate about helping people in their 20s and 30s across the with their money. She is a contributor for AOL’s Daily Finance website and has been quoted on various websites and publications including Forbes, Business Insider, Yahoo, Money Magazine, InvestmentNews, Financial Advisor magazine, and The Huffington Post. She was named one of the “Top Financial Advisors for Millennials” by the website: www.MoneyUnder30.com. Sophia is a sought after speaker and presenter and is an active member of the Financial Planning Association. In her free time, she enjoys performing as an actor/singer and traveling the world with her husband, Jake. Follow her on Twitter @sophiabera or sign up for the Gen Y Planning Newsletter to stay up to date on financial articles geared towards Millennials.