Being a young adult is challenging. Whether you’ve just graduated from college or are still in school, there are so many things that you have to do. From choosing your career, studying, and learning good financial habits that can improve the rest of your life, it’s easy to get overwhelmed. Wondering how to improve your finances, prevent debt, and ensure your financial future? Read these best financial tips for young adults:
Plan for Life Events
Life events should never be taken lightly, including getting married, having children, and buying a home. While you can’t predict when you’ll meet Mr. or Ms. Right, you can ensure you have enough money for big life events and changes when they occur. You should set a budget for how much you think these things will cost. For example, how affordable or extravagant do you want your wedding to be?
In addition, you should plan for smaller life events, like adopting a pet. Becoming a dog or cat parent can be costly, and they come with recurring expenses for the rest of their lives (much like children!) So if you’re not prepared, caring for a pet can cost you more than it should. In addition, because you want to provide your pet with the best possible life, you should have enough money for everything from toys and food to emergency vet visits to ensure they’re always properly cared for, no matter what.
Practice Self Control
When you’re young, you may have fewer inhibitions than your parents, so you tend to spend a little more than you should on everything from food to clothing. However, thinking about your future can help you practice more self-control to help you determine whether you really need to spend money on some items or services. If you want to avoid debt, you’ll need to control your spending, even if that means not buying something you really want.
Tracking your spending is the best way to see all of your expenses without guessing. With credit and debit cards, we tend to forget about how much we spend because we don’t see the total number. However, look at all your bank statements and add up your expenses, and you may be shocked by how much money you’re spending every month. Tracking everything from the cost of your morning coffee to your Netflix subscription can help you understand your financial habits, allowing you to brainstorm different changes to make to reduce spending and increase savings.
Avoid Loans & Debt
Some loans can’t be avoided. For example, when you’re ready to buy a home, you’ll likely need a mortgage loan. However, there are several types of loans, ranging from hard money loans for investors to FHA, VA, conventional, and Non-QM loans for a primary residence, so you should always do your research to understand interest rates and total costs before you sign any documents.
Of course, while a mortgage loan is common for most people, you can avoid other types of loans and debt. For example, some people may want an extravagant wedding and take out personal loans. However, these loans can damage your credit history if you don’t pay them back on time. Sometimes, using debt in the form of credit cards isn’t a good idea either. If you can’t pay off your balance as soon as you make a purchase, consider waiting to purchase an item until you have enough funds available to pay off your balance immediately.
Pay off Debt
If you want to have financial freedom, you should try paying off debt as soon as possible. However, this doesn’t mean you should try to pay off your student loans as soon as you have enough money in your savings. The key is to pay off as much debt as possible while still allowing you to save and spend money on necessities like your rent and groceries.
Take a look at your current expenses to determine how much you need to spend each month on essentials versus how much you spend on other things like entertainment. Once you understand how much you have left over, you can start to plan how much to save and how much to put toward existing debts. Keep in mind that student loan and credit card debt are not the only debts to be ready for in the future. Future healthcare expenses for illnesses or injury, sexual health, and hairloss can become difficult to manage if you are not in the right financial state. Remember, you should aim to pay off at least the minimum balance on your credit cards every month, so how much you can save may vary from month to month.
Have an Emergency Fund
An emergency fund can be a savings account or just a mental note of how much you should keep in your bank accounts at all times and not spend. Your emergency fund will cover unexpected expenses like fixing appliances, medical bills, and rent payments in case something happens and you’re suddenly without a job or have a major expense your regular income won’t cover. Regardless of how much you make, you should always have some money to use towards unexpected expenses to reduce some stress and prevent the need to take out a loan to pay for them.
You need to earn more or drastically reduce your expenses to save more money. Unfortunately, depending on how much you currently make, you may be unable to reduce your expenses more. However, you can increase how much you earn from your job. There are a few ways to increase your salary, but the easiest thing to do is to talk to your boss. If you’ve been in your current position for a while and deserve a raise, consider asking for one based on your work performance.
If your boss isn’t willing to negotiate your salary, you can increase your income by getting a second job or working a side gig on nights and weekends. Of course, this method can be draining, causing your work performance to drop, so you must weigh your options to find the right solution.
Building good financial habits now is crucial to ensuring freedom in the future. When you’re in your 60s, you should be thinking about retirement, not working for ten more years. However, if you didn’t start practicing good financial planning and investing when you were young, you may need to continue working well past retirement age. In addition, taking good care of your finances can ensure you can pay for all the important life events you want, such as having children or becoming a pet parent.
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer who loves to share knowledge about general business, marketing, lifestyle, wellness, and financial tips. During her free time, she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.