8 Financial Tips for Young Adults

When you’re young, money doesn’t have the same importance.

You may know that you didn’t get that toy, or that new game because your parents said it wasn’t in the budget. But when you start getting real adult bills it can feel overwhelming.

Well, this is where financial advice comes into the picture. By keeping a few bucks aside and managing all your expenses, you can secure your future and still enjoy the present.

Here are a few financial tips that will get you started on your journey to financial success.

1. Keep track of your money

As young adults, there are thousands of things to spend money on.

Like ordering food online or buying something you don’t need. That’s why tracking down where all your spending is going is important.

Once you know where your money is going, it gets easier to lower the unnecessary expenses and focus on important things.

2. Think About Taxes

Understanding how income tax works is important even before you start working.

After nailing a job interview and being offered a job, the next talk will be about salary. If you are well aware of how the taxes work based off your salary, it becomes a bit easy to negotiate and see whether what they offer will help you in meet your financial goals or not.

3. Make use of the 50/30/20 rule

The oldest and most feasible financial advice is the famous 50/30/20 rule. Under this rule, your income gets split into three broad buckets. Let’s look at each.

· 50% for the needs

Under the 50% category, all the things that are a must for your survival are covered. Things such as rent, groceries, insurance, utilities, mortgages, etc. Things in the category should be covered by half of the pay after taxes.

For instance, say your rent, car insurance, electric, groceries, and every other necessity cost $2,000 a month. With the 50/30/20 rule, that means your take home pay needs to be at least $4,000 a month.

If the amount is over half you take home pay, then most financial advisors will recommend you cut down on your wants or downsize your lifestyle.

· 30% for the wants

With 30% of your take home pay, ball out, spend every penny on whatever you want whenever you want, and do not ever feel guilty.

It can be anything like dining out at a restaurant, buying a handbag, going out on vacation or a movie, whatever brings you joy, that is not needed to survive.

All these items are not necessary for your survival. These are just a means of entertainment that one uses to make one's life enjoyable.

· 20% for the savings

This 20% is the reason you can ball out on the 30%

When starting out this will become your emergency fund. You should have a minimum of 3 months income saved in case of emergencies. Going back to our $4000 a month income, you would need $12,000 minimum saved up in case you lose your job or something else comes up.

Once your emergency fund is fully funded the rest of your savings will go into investments. After saving this is the most important thing you can do to build wealth.

4. Track down your debts section

Debt is the kryptonite of wealth.

Having too much of it can hinder all your savings plans and makes you change your lifestyle.

This is why you need to be on top of your debt repaying game. Make sure to always pay at least a minimum on outstanding debts to stay away from any lateness or extra fees.

If you already are in debt, you need to get out as quickly as possible.

Make a list of all your debts and list them from highest to lowest interest rates. After that, pay down the highest interest with any and all extra money you make. If you discipline yourself and keep repaying your debt just like this, in no time, you will be debt free.

5. Create a savings account

You need to have a savings account to keep your savings separate from your spending money. If you don’t, you’ll spend it instead of saving it.

Wherever you have a checking account they also offer savings accounts, and it’s good to have a savings account through them. Most banks will set up overdraft protection so that if you do overdraft, it will come out of your savings and not charge you any fees. They also usually allow for instant transfer from savings to checking. Both features can and are very useful.

But, if you don’t have control of your finances, if you will overspend because you know you have both of those features, then it may be best to get a savings account at a completely different bank and make it just a little inconvenient to get to that money. This will likely help you from overspending if that’s your habit to do.

6. Pay with cash whenever possible

If you truly cannot control your spending while using credit cards, my younger self was very guilty of this, then you really should consider switching to all cash.

Sooner or later, this habit will leave them with huge debts that might even get hard to pay. The best way to control oneself is by switching over from a credit card to a debit card or cash.

With this, you won’t end up getting debt-ridden and could also see how much money you are unnecessarily spending.

7. Get yourself a financial advisor

When you start earning money the first thing you want to do is spend it.

On that new electronic, game, clothing, or at a nice restaurant.

It can be really tempting, and honestly you should get something nice for yourself with your first paycheck.

But you should also look into getting a financial advisor. They are not just for rich people; they will help you become rich if you follow their advice. They’ll help you plan out all your investment and savings plan in an organized manner.

There is only one downside of getting a financial advisor, they do have fees, but you’ll find paying for quality is never a bad investment.

8. Take care of your health

“Health is wealth.”

When you start working, you can feel like you have to “pay your dues” or “prove your worth”, and often times that comes at the expense of your health.

With all the pressure of work and creating stability in one’s life, youngsters sometimes just forget to keep a check on their health. No amount of money will make you healthy without you putting in time and energy to get there. You can buy a gym membership, hire a personal trainer, and even a personal chef, but unless you put in the work it means nothing. Not only that, but in the long run you’ll end up working less and likely making less because you have to take time off to recover from bad health.

Apart from daily exercising and eating well, there is one more thing that can help you in ensuring a healthy future: Health Insurance.

Health Insurance is a way of safeguarding your health by covering all the expensive costs that come in case you fall severely sick and need to go undergo treatment. This is one of the best pieces of financial advice for young adults who want to live without hindering their finances.

Conclusion

The above-mentioned personal finance tips for young adults are crucial for those who want to save and invest to secure their safe future. The way you manage your money today will ensure you are leading a stress-free life tomorrow.

So, spend your money, enjoy life. But do so smartly and in no time you’ll be enjoying financial freedom.