Being a young adult and trying to be financially smart can be a real challenge. It’s not a subject taught in high school, nor is common home finances taught at college leaving individuals relying on parents and their own mistakes, which can lead to financial woes. Here are 3 financial tips to get you started.
#1. It’s All About Self Control
You may have been lucky enough to have parents who taught you self control. If not, the sooner you learn about delaying gratification the better off your finances will be. We live in a world of ‘get it now’ and ‘pay for it later’ thanks to the ease of obtaining credit. But putting that new outfit or those tickets on credit can really land up costing you a bundle.
If you like to put all your purchases on your credit card, even when you can’t pay it off at the end of the month, you could find you are still paying for those purchases decades later. Keep your credit card for the convenience of having it. Use it for emergency purposes, booking flights, etc. and always pay off the balance and the end of the month.
#2 Know Where You Spend It
It’s very important to know exactly where you are spending your money, and that your expenses do not add up to more than your income. The best thing you can do is budget each month and make small changes so that you can manage your cost of living on the income you earn. Keep your recurring monthly expenses as low as possible to save some money. If you don’t live in that high end condo now while you are renting in a few years you might actually be able to buy it.
#3 Get Your Emergency Fund Started
Sadly, most people are not ready for any type of emergency, even a small one. It’s important to pay yourself first and get your emergency fund set up so that you are putting a little away every payday for that rainy day. Once you get into the habit of doing this it won’t be a problem at all. Later you will be able use that money for many things – a vacation, retirement, down payment on a home, or an emergency. When you start young you have the beauty of compounded interest.