For millennials at the start of their careers looking to save some extra money, financial expert Chris Hogan has some advice on how to become more savvy on what to do with that first paycheck.
Budget, budget, budgetHogan couldn’t stress enough the importance of establishing a budget for yourself, laying out each month where your money is going.
“It’s the importance of being in control,” he told FOX Business’ Maria Bartiromo during an interview on Tuesday. “You tell your money where to go, instead of wondering where it went. It stretches out and gives you more power.”
The power of compound interest
There’s no greater way to exponentially increase your savings than investing money in 401(k)s, a tax-sheltered retirement plan that allows employees to set aside a portion of their compensation before income taxes are applied and 403(b)s, a similar plan designed for public school or non-profit employees.
“The 401(k) is a gamechanger,” Hogan said, adding that employees should be aware of when they’re eligible to start investing, because most places require a stint of six, nine or even 12 months.
The danger of debt
Although it may seem easy to sign up for things like credit cards, Hogan warned that “five minutes of stupid can bring you years of regret trying to attack and pay off debt.” Millennials need to avoid debt like the plague, he said, and be on the constant lookout for scams that can take years to recover from.
The truth about the FICO score
FICO, a credit score in the U.S. that analyzes the likelihood someone will pay their debts, is typically used by banks and credit card companies to study the risk of loaning money to consumers. But Hogan said there’s a lot of misunderstanding when it comes to the FICO score – namely, that people think it’s an indication of wealth.
Young people, he said, need to be aware that it actually takes into account your debt payment, your debt history, the type of debt you have and the likelihood that you’ll rack up more debt.
“If I could go back and just sit me down and really explain these [tips], I think I would’ve made much more financial progress,” Hogan said.