Most young adults these days do not have a clue about how to administer their funds. This happens because, unfortunately, managing of funds is not a required subject neither in college nor in high school.
Here are a few financial tips for young adults that you can use to get a good start and live happily and prosperous all your life.
1. Learn self-control
Self-gratification is a major problem for a young person who is earning money. It is so easy to flip your wallet and produce a credit card. But they forget that they will be paying high interests for the pleasure of buying that pair of jeans. Your parents never paid you before the job was done, there is no reason why you should spend the money you have not earned ahead of time either.
If you have a credit card, use it wisely, never spend more than you can afford to pay back when the bill arrives. Amounts left behind will accumulate interests upon interests and you will be paying that debt years into the future.
We are not saying that using your credit card is wrong, many people use their credit cards to pay for their monthly expenses, but they cancel the complete bill before it expires so they don’t have to pay interests. Another important point about credit cards is that you do not need twenty of them; you only need one or even two so that you can keep track of your spending better.
2. Educate yourself
It is important that you educate yourself with regards to the use and care of money. If you don’t, there will always be someone who will help you spend it or manage it incorrectly to the point where you can find yourself without anything. That said, not everyone wants to steal your money, but many may give you wrong advice. Buying a few books on finances is a great place to start.
3. Know where your money goes
After reading a few books about finances, you will understand the importance of knowing when and how you spent every dime you earned. After a couple of months of expenses, you will be able to see where you need to cut down so there is always something left in the bank when the month is over.
Keep track and add up those expenses, and you will find out very soon it is cheaper for you to bring a lunch from home to the office instead of going to a restaurant or fast food place every day. Small changes to your routine and expenses will add up to savings.
You may say that these changes will only save you a few bucks every month, but if you look at the big picture a few bucks become a lot of bucks with time. If you hang on and stay at home with your parents for a few years or if you find yourself a small apartment, you will be able to own your place sooner that you think.
4. Start saving early
There is one cardinal rule related to finances that you must always respect: “always pay yourself first.” It does not matter how much you owe on your student loan or how much you borrowed from your parents or whatever. Credit card payment, car payments, any payments, the first thing you must always do is to put a little something away. It does not matter how much; anything will do as long as you do it every month from every check.
Building a nest egg will let you sleep soundly at night and will always be available for use if you have an emergency. If you make this a permanent habit and forget that it exists until the next time you put money into it, with time it will not be an emergency fund anymore, it will be travel money, car money, retirement money, or anything else you want it for.
5. Start your retirement fund now
One is never too young to start saving for old age and retirement, in fact, the sooner you start, the more you will have saved when you are ready to retire in style. When you start young, principals are lower.
The retirement plan your company has is a better option than an individual plan because in the first place, you can throw in your pre-tax dollars and the limit to how much you can contribute is usually higher than in a private retirement plan. Many companies also contribute some money to their employee’s retirement.
6. Deal with taxes responsibly
A big mistake made by many people is that when they are offered a job they do not take into account how much they must pay the IRS out of their monthly check. Many times they find that they do not have enough to live on after the IRS takes its cut. Use online calculators to determine how much you will have left for you after taxes.
While you are out there learning about taxes, it would be a great idea for you to learn how to do your own tax return because having someone else do it for you may get you into trouble with the IRS.
7. Be serious about health insurance
Health insurance premiums are in the same category as your nest egg funds − never ever stop paying them. A visit to a hospital with a broken bone or something else can run a tab up to the thousands of dollars; keep your health insurance paid always. If you do not have insurance, find a reputable insurance company and buy some health insurance immediately, an accident can happen at any moment and under any circumstances so get insured now.
Buying health insurance is easy; buying good health insurance is not so easy. Find yourself two or three respected, reputable insurance companies in your city and ask for quotes from them. Read the fine print and ask all the questions you want about the coverage they offer you, add anything you think is necessary for you and have both companies cover the same things so you can compare their prices.
8. Guard your wealth
Protect your money. If you rent a house or an apartment, buy renter’s insurance to protect your things. Even though you are young and strong, things happen, so do some research on disability insurance and buy it. It is imperative that you protect your ability to earn a living, and disability insurance will keep you going if you are incapable of working for long periods of time because of injury or illness.
If you believe that you need help to manage your money, find a financial manager who works for a fee, not one that works on commission. Check him or her out before you sign a contract with them so you make sure that he or she has a good reputation. A retirement account at the office will protect your money from inflation and taxes. Back to the prodigal nest egg, do not put your money in the cookie jar or in a can buried in the garden, invest it as best you can in CDs, bonds, and mutual funds, money market, and/or high-interest savings accounts.
You do not need a degree or special knowledge to administer your money correctly, use your common sense and read, read, read. Practice and constant study will soon turn you into an expert, a rich expert. The rules we mention above will get you on your way if you follow and respect them always.