Creating your financial foundation while you are still young

By Lauren Elkins

For the Deseret News

Published: Wednesday, June 18 2014 12:00 a.m. MDT

Some things I’ve learned the hard way, some I learned by doing it right, and some things I wish I would have done before I eased into my 30s. This article will focus on 7 areas to set up your financial foundation while you're still in your 20s.

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Some things I’ve learned the hard way, some I learned by doing it right and some things I wish I would have done before I eased into my 30s. The following are excellent pointers for setting yourself up for financial success while you’re still living in your 20s:

Credit cards

When I started college, the junk mail started rolling in from the credit card companies. Everybody had an offer for me with varying ranges of APRs, fees or no fees, reward programs and personalized with your picture. There are no roadblocks to creating debt. You have to set them up yourself.

It’s tempting to put a backpacking trip through Europe or a Mexican vacation on a credit card, or to buy furniture and electronics for your first apartment on a store card. These quickly turn into haunting debts, especially when you only touch the minimum payments and let the interest pile on.

Instead, try to set up a spending plan, based on your actual income, as suggested on the Daily Worth: “Get used to saving for the things you want with the money you earn and avoid using credit cards except to build credit—and only if you can pay the balance off within the month.”

At first, I learned this the hard way and carried a balance on my credit card, but thankfully, it was only one card and I focused on paying that down when I had steadier employment. Then I learned to set money aside for that Mexican Riviera cruise I wanted to take. The funny thing? When it was time to buy the cruise, I had a hard time parting with the money and therefore forced myself to stay within a tight budget for the vacation.

Student loans

Be smart about your education.

Do you really need to double major (or to add that certain minor)?

Can you satisfy your generals by attending a community college?

Can you get a job with the school and get a tuition reduction?

Have you applied for scholarships?

Make a student loan your last option, and make a student loan from a private institution your very last option because they are harder to pay back as they offer less flexibility.

If you don’t have the ability to get through school without taking out loans, following this advice from Forbes:

Avoid taking on deb that exceeds your expected first year's salary. (If you're going to be a school teacher in Utah, don't take out loans great than $30,000.)

When you have to borrow, go with federal loans before private loans. (Federal loans are fixed, private loans are variable which means next month they could jump the interest rate; federal loans offer deferment if you go back to school, are unemployed, or serve in the military, but private loans do not.)

If you decide you have to take out private loans, do so only after you have maximized your federal loans.

If you attend school on student loans, live as cheaply as possible.

Don't forget the various education tax benefits: American Opportunity Tax Credit, Lifetime Learning Tax Redit, Tuition and Fees Deduction.

The cost of university-level education in the United States has risen 1,120 percent since 1978, according to Blooomberg. This has created the student loan crisis in which the average 2014 college graduate owes $33,000, the Wall Street Journal indicates. Compare that to the 1993 graduating class that took out, on average, $10,000 in loans. Americans today owe $1.1 trillion in student loan debt, according to CNN.