Top 4 Financial Advice for Young Adults
It’s no surprise that young adults, generally in the 18-25 age bracket, are looking to expand their financial knowledge. After all, you’re constantly dealing with different sources of financial pressure at this stage of life. Whether it’s post-secondary education, marriage, a first home, or a baby, money becomes a priority at every milestone in life. Let’s look at four of the key points to understand about money. These financial insights will help young adults make the most of their finances.
Best Financial Tips for Young Adults
In order to reduce the pressure and increase financial control, you should prepare yourself. Here are top financial tips for young adults to help you manage your spending and saving throughout your adult life, so you can make the transition to your 30s and (mind you) 40s with confidence and a solid financial foundation!
Create a Budget: The First Step to Managing Your Money
A budget is an essential tool that can help you manage your day-to-day finances, pay your bills on time and keep your debts under control.
Once credit comes into your life, you have the freedom to buy what you want when you want it. You can pay now and ask questions later. On the other hand, having a budget takes you away from that impulse buying mentality. Setting a budget is an act of self-control that shows you care about where your money is going and what you can afford.
Not all budgeting styles work for everyone; some are better suited to certain personality types than others. Some people calculate everything down to the last penny, while others prefer to save and spend a little more freely. Here are two simple but effective budgeting strategies that may work for you:
- Budgeting to save first
- Zero-Based Budgeting
The above suggestions are just a brief sample of budgeting methods you can try, so don’t be discouraged if they don’t work for you. There are several great budgeting methods and resources out there, including free helpful apps that are useful for managing your monthly expenses with more uncertainty.
Turn Many Debts into One!
The first step to reducing your debt load is to pay off your high-interest debts. These debts (e.g., credit card balances) are considered toxic because they escalate quickly and undermine your ability to save. Tightening your belt a bit now to pay them off faster will help you save more in the long run.
There are ways to ease a debt burden that seems difficult to manage. For example, if you have multiple loans, you may consider debt consolidation. As the name suggests, this technique combines all your debts into one loan, which you pay off over some time. Having only one loan provides certain advantages:
- You make only one payment per month.
- You may pay less interest.
- Your monthly payments may be lower.
Discuss with your bank or the financial advisor if debt consolidation is a good alternative for you.
Negotiate Prices
People often think that earning more money will solve their financial problems. But unless you make a consistent effort to manage your spending, your bank account will be just as empty at the end of the month, no matter how much you earn. So, make it a habit to evaluate and reduce your monthly bills through informed negotiation so that you can grow your savings and improve your financial health.
Recurring monthly payments, such as cell phone, Internet, cable, and streaming services (among others), are negotiable. You can call your provider to see if there is a way to reduce your rate.
Experts recommend keeping a few things in mind when seeking to reduce a bill. First, be friendly. If you are attacking whoever you are trying to negotiate with, they might not go out of their way to help you. Also, try to find out more. Find out how much competitors are charging. If you say you’ll do business with a new company to save $30 a month, there may be a greater chance that your current provider will make you an offer to stay.
Take the time to review your subscriptions. Many video and music services offer convenient family plans to save money. Be sure to get rid of any subscriptions you no longer use.
TIP: If the idea of making a series of calls to try to reduce the price of your services seems overwhelming, leave it to companies that are experts in this field. They will negotiate your payments and subscription services on your behalf, helping you maximize the savings you can achieve with your providers.
Plan for Your Future
As you get older, a few essential acronyms rise to the top of your priority list: 529 plan, 401(k), and Roth IRA, to name a few. Each of these accounts and savings programs can be critical to your long-term financial health. Here’s the good news: the younger you are, your savings and investments will have more opportunities to flourish.
In short, start good habits now and reap the benefits tomorrow.
Because time is on your side, 401(k) contributions pay off in a big way - even $50 every two weeks can be a huge help. Be sure to check to see if your employer matches your 401(k) contribution. If so, maximize it. It’s free money.
Life insurance - another valuable financial tool - can be cheaper when you’re young and healthy. You’ll likely soon incur significant debt, such as a mortgage, and a life insurance policy helps protect your loved ones from these obligations in the event of an unexpected event. Like an emergency fund, a life insurance policy is a wise way to deal with life’s unexpected events.
Knowing the basics of finance is not a luxury but a necessity. Fortunately, you don’t need any special training or a fancy degree to manage your finances. Just master these free financial tips and put them into practice to improve your money management skills. If you’ve already made mistakes, learn the lesson and move on. While you’re working, saving, and investing, take time to enjoy yourself and relax regularly. Most importantly, never compromise between health and wealth or, you will spend wealth to regain your health.