Adulting: Money Management Tips for Young Adults
Being a young adult can be a complex stage in life. At this stage of life, you’re trying to navigate through relationships and maintain a particular lifestyle. More so, in this phase, managing money seems like an impossible task. Unfortunately, most schools don’t teach kids about personal finance. This makes many young adults clueless about managing their money, staying out of debt, and applying for credit.
A short study conducted by financial advisors shows that one out of five young adults isn’t confident in managing their finances. 85% of them say they wish they would have been taught about money management in school. Luckily as of 2020, states are coming up with methods of doing away with this bad personal finance culture. 21 states have made it mandatory for high school students to take up a private finance course while 25 of them require them to take up an economics class. This should at least help a portion of the next generation.
However, in as much as all this is taught, all this education trickles down to self-control. Whether you are in your 20’s or 60’s, you still have the chance to improve your financial habits. Some of the most important lessons to help you through include:
1) Budgeting
Sitting down and creating a budget can be underrated. More so, sticking to the budget can be the hardest. However, you can solve this by setting reasonable short-term and long-term goals. Short-term plans can include paying house rent or buying books, while long-term plans can include paying off your student loans.
However, the 50/30/20 approach comes in handy in planning:
- 50% representing monthly utility bills essentials like rent, bills, and groceries
- 30% representing lifestyle expenses like clothes, takeout’s, etc
- 20% representing your savings
Having a budget gives you better money habits as you are in control of where your money goes.
2) Set Up An Emergency Fund
An emergency fund gives you the discipline of not spending unless you have to. Having money in savings accounts helps you out, especially during financial hardships.
Suppose you treat this as a non-negotiable monthly expense? In that case, you will have saved up not only for emergency periods but also for retirement, vacations, or even for the down payment for a home. Just ensure that whichever savings plan you settle for allows you to withdraw cash as quickly as you can for your emergency.
3) Pay-off Your Debts
Lots of young adults find themselves buried in debt due to various reasons. These may range from payday loans to student overdrafts. However, a Philadelphia bankruptcy lawyer will help you identify which debts should be prioritized. Always pay the high-interest loans first but if you’ve acquired payday loans, pay these off first. Be aggressive about paying off your debts to maintain a good credit score.
Always spend money on credit that you know you already have, and ensure that you clear it before the end of the month before it accrues any interest.
4) Track Your Spending Habits
Ever lost track of how much you’ve spent? Look at your bank account towards the end of the month, and you’ll be shocked at what’s left! One way you can curb your spending habits is by withdrawing cash at the beginning of every week. This helps keep track of what you’ve spent and what you’ve got left.
5) Smart Shopping
Be smart about how you spend your money. Make a weekly plan by having a list of groceries or household items that you need and stick to the list.
There’s no shame in comparing different grocery and clothing outlets, electricity and gas bills for other estates, your car and house insurance. You can save lots of money by choosing various service providers.
6) Unsubscribe From Services That You Don’t Use
It doesn’t matter whether you have been to the gym only once. Canceling unnecessary subscriptions can save you lots of money. You can direct the funds into your savings or use them for other things.
7) Health Insurance Plan
This a must-have even if you’re in perfect shape. The best option will be to stay under your parent’s health insurance plan if you’re under 26. When you’re over 26, look for quotes from different insurance providers and settle for the lowest rates based on your income.
Choose a more expensive plan as it will be cost-effective for you if you already have health issues. If unexpected problems arise, a health insurance plan comes in handy to cover your expenses without interfering with your financial goals.
Final Thoughts
It’s never too late to change your financial habits. You don’t have to feel embarrassed about your old habits. These tips act as a stepping stone to better personal finance habits. Start today!
About the Author
Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.
