How to Be a Financial Grownup. Bobbi Rebell

you need professional help. That’s when it’s a good idea to at least have a conversation with a credit counseling agency, or a fee-only Certified Financial Planner, to see what they may be able to offer.

      Prioritize and Get It Done

      Tackle the highest-interest-rate debt first. You make minimum payments on each one, except the most expensive one and when that’s paid off you roll the payment down to the next one, and so on. This method will likely save you the most money.

      Alternate option: If you’re anxious to simplify your finances, you can knock out the card with the lowest balance first, and work your way up.

      Either way can work, as long as you have a plan.

      Change the Math

      Talk to the people or companies that hold your debt, and make the case for lowering the interest rate. The lower your interest rates, the faster you will get out of debt, so it makes sense to try to get your interest rates down, either by negotiating with your current creditors, transferring balances, or with a debt-consolidation loan.

      CREDIT SCORES: A GROWNUP FINANCIAL SCORECARD

      Credit scores matter a lot. And with each generation the situation seems to be getting worse. According to Experian, Millennials as a generation have the lowest average credit scores compared to other generations, including Gen X and Baby Boomers. In large part that’s because of the growing problem of student debt, which we’ll come back to soon.

      Part of the reason that young people’s credit scores are so low, on a relative basis, is that young people simply aren’t signing up for credit cards as much. Priorities are different by necessity. Young people are more focused on paying off student loans and, in some cases, buying cars. They don’t have the track record to prove they can be counted on to pay off an unsecured loan.

      NerdWallet found that about a third of young people ages 18 to 34 have never even applied for a credit card. That’s a problem. To be a financial grownup you have to have credit. Yes, you can take out cash to pay for things. But if you want to get a mortgage, you need good credit. You also need a real credit history if you want to take out an auto loan. A good credit score will also help you get the best rates on insurance.

      Not having a solid credit history can even hurt job seekers. Many employers check the credit history of job candidates. Someone with a low credit score could be perceived as irresponsible, unorganized, and, in some fields, even a security risk.

      Which is why it’s important to invest time when you’re looking into getting credit, as told by the head of NerdWallet himself below.

TIM CHEN

      • CEO, NERDWALLET

      MY FINANCIAL GROWNUP MOMENT

      My biggest personal finance wake-up call came after my sister asked me to help her find a new credit card. I thought it would be a fairly simple exercise; as a financial analyst, I objectively evaluated dollars and cents as a living. It took me nearly a week to research and compile a spreadsheet of about 400 cards – a fraction of what’s available in the U.S. – in order to make an informed decision. I was shocked.

      Most Americans will sign up for a credit card at some point in life. If it took me – literally a trained professional – a week to objectively look at a sliver of what’s available, how can any one person be expected to choose the right credit card for them? Or the right insurance policy? Or 401k plan? I realized the deck was completely stacked against consumers.

      MY LESSON TO SHARE

      My major takeaway was, Millennials are at the height of their financial confusion. They are faced with dozens of critical personal finance decisions, and they need a trusted source of clarity around what to do.

      The good news is, there is usually a “right” choice when it comes to personal finance. But depending on friends’ and family’s advice – or, even worse, signing up for a personal finance product because you got an offer in the mail that looked good – isn’t going to get you the best product for your needs.

      The biggest piece of advice I would give anyone is: stop being scared of, or apathetic toward, your money. Be proactive and look for simple, transparent guidance on how you should approach your financial decisions and select the best products for you. Taking a little extra time now can lead to millions down the line.

      GET CONTROL OF YOUR CREDIT SCORE

      NERDWALLET FOUND THAT many young people are in denial about the importance of having a track record when it comes to credit. There are so many horror stories of people getting into trouble for using credit in an irresponsible way during the great recession that it may seem better to just avoid it altogether. And grownup purchases such as mortgages seem a lifetime away.

      But building a credit history takes time, and often the best time to start is in college. That’s the time when companies will take a risk on a young person. Many will even give students a credit line without their parents as co-signers. Use the cards to make small purchases, and pay them off in full every month.

      Another tip to boost your credit score: add up how much credit you have available. If you have three credit cards, and each has a limit of $1,000, you have $3,000 of credit available. Use only a small portion, ideally about 10 percent, and really try to use no more than 30 percent.

      Stay aware of your credit score. Federal law mandates access to your credit score once a year, for free. A good place to start is www.annualcreditreport.com. All three credit agencies – Experian, Equifax, and TransUnion – make your annual reports available there. And though you can get your credit reports from all three agencies at once, you can also space out your reports and get one every four months. Know your number.

      If you don’t get a credit card in college, be strategic when you do apply. Every time you do, your credit score gets what’s called a “hard” credit inquiry. The more cards you have, the riskier you look. That lowers your credit score and starts a downward cycle. NerdWallet advises Millennials to be patient and not to apply for a credit card more often than every six months, or even once a year. Also, research credit cards that are targeted toward the score you have, or toward new candidates with no score if that’s your situation. And even if you’re no longer in college, if you have a parent who will co-sign, by all means accept the help. Be appreciative and, most importantly, responsible. Now both of your credit scores are on the line.

       There is usually a “right” choice

      THE $1.3 BILLION ELEPHANT IN THE ROOM: STUDENT DEBT

      Young adults are generally less materialistic than previous generations. Partly because there has been a cultural shift towards valuing experiences over acquiring material goods. But there’s more to the story. Many also have so much student debt that they simply can’t afford to engage in the old “Shop ’til you drop” sport enjoyed by many Gen Xers who grew up in the booming 1980s. Student debt has reached alarming levels, so it’s no surprise that Experian found that student debt was a primary focus of young adults.

      The Congressional Budget Office reports that student debt in this country is now at $1.3 billion. According to The Institute for College Access & Success (TICAS), the percentage of college students who graduate with debt had climbed to 71 percent in 2012. The average amount owed is $31,946, according to NerdWallet. There are a lot of reasons. One is that state budgets have been cut at many public colleges, so students who are looking for value in their educations, by going to the public system, are footing a bigger part of the bill. And the debt never goes away. Student loans cannot be discharged through bankruptcy.

      Be Proactive, Informed, and Aggressive

      Sara, a 23-year-old who