Building a Foundation for Your Finances
Unless you’ve won the lottery and are entering the apprenticeship program just for the chance to learn a lot and build cool things, you’re like the rest of us: You don’t have enough money for everything you want. It’s the reality of a consumer society: There’s so much to buy, but only so much money at your disposal.
Whether you’re aware of them all or not, you make choices every day about how to spend your money. And depending on your situation, those choices are either good ones or bad ones – each one impacts your finances, now and in the future.
As you’re starting your apprenticeship program, this is the perfect time to start building a financial foundation, so you can have a realistic shot at the lifestyle you want – at each stage of your life. Given the reality of all there is to spend money on, how can you stay in control?
The good news is that financial planning is an integral component of the Laborers Apprenticeship program. As an apprentice, you’ll learn six critical elements to building a strong and long-lasting financial foundation. Here’s a brief, high-level look at each one.
- Be prepared.
This is just about thinking ahead. During your first year of apprenticeship, you may be earning a higher hourly wage then you ever have before. But sometimes apprentices won’t work all year-round, so don’t base your spending on an income amount that may be too optimistic.
- Build an emergency fund.
You have to expect the unexpected: Your car breaks down, or your current project ends and it may be a week or several weeks before you’re dispatched to a new job. Building an emergency fund may be the most important thing you can do to get through any tough times. The basic guideline is to save between three and six months of your basic living expenses. Emergency funds take time to build, so start with as much as you can. When something bad happens, the relief of knowing you’ve got money put aside to cover it is a game-changer.
- Create a spending plan.
You can call it a budget, or whatever you like. A spending plan is simple: a realistic picture of how much comes in, how much goes out, and what’s leftover.
There are several key parts to this.
- First, don’t overestimate what comes in; know what your reliable net income will be, after taxes, from all sources.
- Second, identify every type of expense where the money goes out – if you don’t know where the money’s going, you don’t have a plan. If you don’t have enough left over for emergencies or savings, you can look at which expenses you can cut down or eliminate. An app called Wally makes it easy to get a picture of where you spend your money every day.
- Third, make sure there IS some left overuse it to build your emergency fund first, and after that start saving for something big. You Need A Budget is an app that will make starting and keeping a budget simple. It can help with planning expenses and savings, setting and adjusting goals, and showing progress toward them.
- Build good credit, or start fixing it.
It’s another fact of our lives: Your credit has a giant impact on your ability to get and do what you want. But your credit rating can change over time, so even if you’re not in a good position now, you can build it back up; it’s like completing an apprenticeship program – it takes work and time. Here are some top tips for building and maintaining good credit:
- Set up a system that makes sure you pay your bills on time. This is the most import step to building up your credit.
- Don’t ignore collection accounts; if you have trouble paying your bills, call your creditors immediately and explain your situation.
- Don’t move your debt around, and don’t bounce checks. You can also apply for a secured credit card to build or re-establish credit (ask your bank about tools like this to build back credit).
- Pay down debt.
If you’re in debt, you have to take the long view: commitment and time are your best tools. Follow these steps to create a plan that will put you back in control of your financial future:
- Prioritize your debts. Pay more than the minimum, and pay off the smallest balances first (it’ll give you a sense of accomplishment every time you completely pay off a debt).
- Determine your total debt so you can create a realistic and effective debt repayment plan – then commit to a payment schedule.
- As you repay debts, cut down to using only one credit account.
- Stop charging anything until your credit cards are all paid off. And when you’ve paid it off, follow this rule: If you can’t pay cash, don’t buy it – save for it. Don’t treat your credit cards like loans. Ultimately the only thing you should borrow for is a house and (maybe) a vehicle.
Think long-term about credit – it can take months or even a few years to establish a strong credit rating.
- Start saving for your future.
When you’ve paid off debt and established an emergency fund, it’s going to feel great to have money left over at the end of the month. Now it’s time to decide what it should go toward, and where to put it. Go with a low-risk investment; you should talk to a banker or a certified financial planner about your options.
Starting with the Laborers Apprenticeship Program is a positive first step toward building that financial foundation because we’ll teach you how to manage your money and build a prosperous future for you and your family.
One last resource for you: Money Under 30 is a website especially for young adults, focusing on topics that are relevant to them. It offers simple, informative and relatable content.