Young people need to be financially aware

Educate, plan and be aware.

This is the general advice of Yuma-area financial professionals for young adults starting a solid financial life in today's ailing economy.

People need to take it upon themselves to invest in their future by learning how to manage money and by spending the time and energy needed to manage it properly, said Page Misenhimer, personal financial specialist and certified public accountant for Misenhimer, Aivazian and Tennant. 

He added that younger people are in the perfect position to start planning at all levels of finance for the rest of their lives, but they need to do just that - plan.

Individuals need to understand the magnitude of the decisions they make regarding money, especially with the economic downfall, added Ed Swierkos, coordinator of financial aid operations at Arizona Western College.

"Awareness is the most important thing," said Swierkos. 

Making sound financial decisions today more than ever requires thinking about the pros and cons of a purchase and how that purchase will affect your current and future financial life.

While education and awareness are critical, taking action is the determining final step.

"The number one thing that kills financial planning is procrastination," said Tom Rush, wealth adviser for Yuma Investment Wealth Management.

Rush added that he might be able to watch videos and read books to become an expert in physical fitness but in order to achieve success, he must go to the gym. It's the same with financial planning: You can learn about it but you must practice it to succeed.

Misenhimer suggests creating an overall financial plan with both long-term and short-term goals that become part of your everyday decisions.

Swierkos said creating a budget lets you know where your money is going and how much money you have. Using a budget and setting priorities pushes individuals to make the sacrifices needed to stay on top in today's financial world.

Managing money encompasses both daily decisions and long-term issues such as building credit, taking out loans, planning for retirement and investing.

Building good credit is essential in the current economy, however, it can be confusing and overwhelming. 

Bill Craft, branch manager at Wells Fargo Home Mortgage, said younger people need to stay on top of their credit because they don't have a history to fall back on. Plus, guidelines and credit checks are getting tighter because of the economic situation.

Misenhimer added that society today pushes buy now, buy bigger and buy better. However, young adults need to distinguish between their needs and wants.

"When you use credit to buy something before you can afford it, you will give something up later in life because of the interest you pay on it."

Swierkos stressed reading the fine print to understand the terms of a credit card and controlling your credit by monitoring your credit report and credit score.

A credit score is a credit agency's assessment of a person's ability to make a monthly payment. The scores are number-based, with higher numbers indicating a greater ability to make payments, Craft said.       

Craft said conventional home loans require a minimum of 10 percent down, so it's also important to save and make sure you can afford the purchase. "You have to have the money to buy a pair of shoes before you buy them, and its the same with a house," he said.

Misenhimer suggests beginning a reverse payment plan before making a large purchase, such as a house or car. This entails paying yourself the monthly car or house payment for a few months to verify that you can afford that payment and to save a larger portion of the cost before purchasing the home or vehicle.

In addition to building credit and managing monthly payments, planning for retirement should be part of young individuals' financial structure.

"The key thing is to pay yourself first, and then pay everyone else," Rush said. 

Misenhimer agreed, saying pension plans should be a fixed monthly payment because the compound interest will add up to big numbers in the future and the longer you wait, the harder it becomes.

The final suggestion of finance professionals is to begin investing once it becomes an option.

Investments always involve risks, and Rush's rule of thumb is to have three to six months' worth of bills in saving before venturing into that world. He added that beginning investors may find it wise to seek a professional to guide them through the investing process.

Misenhimer added that many successful investments include "a good solid combination of real estate and stocks."

Finance professionals also suggest using resources to become financially literate. Some resources available are books, magazines, the Web, workshops and financial consultants. AWC offers assistance to both students and the public, including brochures, pamphlets, in-person finance help and a Web site dedicated to financial literacy at www.azwestern.edu/finaid.

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CREDIT CARD ADVICE

• Have only one or two cards
• Make payments on time
• Keep low or no balance
• Do not max out card
• Check interest rates
• Monitor credit reports