Since not everyone attends personal finance lessons in high school or college, most young adults become clueless about the financial management dos and don'ts. You could be on the same bandwagon.
Many states now require high schools to take students through a course in personal finance beginning 2021 as a remedy for this. The move is in the right direction for the next generation of young people. However, those already out of school do not stand to benefit.
This lack of basic financial management knowledge is why many people who are just starting their economic growth begin on the wrong footing. They cannot manage their savings and expenditure. Besides, they may not understand when and why to apply for credit or how to stay out of debt, which makes them hurt their credit score.
We outline some of the financial tips that will help you maintain sound financial health.
4 Financial Management Tips for Young Adults
Self-control is a skill that takes time to nurture, and it would be great to start learning the skill earlier. You are privileged if you are among those who acquired this trait from parents or guardians at a tender age.
The key to learning self-control over your finances lies in your ability to delay gratification. You can effortlessly secure an item on credit whenever you want it if you have a good credit rating. However, saving up for the item saves you from paying the interest that comes with loans.
If you consistently make your purchases using credit cards, there are chances you will continue paying for most of the items in 10 years. Ensure that you set off all your credit balances at the end of the month to create a good credit rating.
Control Your Savings and Expenditure
The key to financial management lies in how you control your income. Monitor your savings and expenditures to know where your financial resources go. The younger you are, the higher your savings can grow.
One of the most professional ways to track your finances is using a budgeting app such as Simplifi by Quicken. Friends, family, and evil financial planners will help you mismanage your money if you cannot learn to manage it by yourself. The trick is to take the initiative yourself, because while others may have good intentions, they lack financial management knowledge.
Avoid relying on others and take charge. You can leverage books or articles on personal finance or pay up for finance management lessons.
Start and Maintain an Emergency Fund
You cannot save any money without a dedicated emergency fund. Indeed, keeping money for emergencies keeps you away from financial problems.
Irrespective of your monthly income size and the amount you owe on student loans or credit cards, ensure you put some money into the emergency fund. The fund should neither be part of your savings nor your health insurance.
Do not stop your monthly remittances to this fund even when you get lucky enough to see the money pile up due to a lack of emergencies. You can use it later for vacation, down payment for a home, or as retirement savings.
Pay Attention to Your Taxes
Firstly, know how income taxes work even before you receive your first paycheck. Calculate your taxes based on your salary and know what remains for your obligations.
You can use online calculators to find out how payroll taxes work. The calculators will show you your net pay from your gross salary. You risk ending up in problems if you cannot stay on the right side of the tax law.
Managing personal finances guarantees you a peaceful and enjoyable life. It also ensures that you become prosperous at a young age and retire gracefully and with a healthy financial background. Fortunately, you do not need any fancy education to put these personal financial management tips into action.
WRITTEN BYSerena K. Johnson