How to manage your money

8 Financial Tips for Young Adults

Amy Fontinelle has more than 15 years of experience covering personal finance—insurance, home ownership, retirement planning, financial aid, budgeting, and credit cards—as well corporate finance and accounting, economics, and investing. In addition to Investopedia, she has written for Forbes Advisor, The Motley Fool, Credible, and Insider and is the managing editor of an economics journal. She is a graduate of Washington University in St. Louis.

Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.

Suzanne is a researcher, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and has worked on print content for business owners, national brands, and major publications.

A class titled “Finance for Young Adults” usually isn’t part of a high school curriculum—an unfortunate oversight that leaves many young people clueless about how to manage their money, apply for credit, and stay out of debt. Although some progress has been made—23 U.S. states required a personal finance course and 25 required an economics course for high school graduation in 2022—there are still large knowledge gaps in this age group.

Basic economic and financial education in high schools should help at least a segment of the next generation, but young adults in the crucial post-high school years also need to master core lessons about money. Let’s take a look at eight of the most important rules to get your finances on the best possible track. Never forget that the younger you are, the more time your savings and investments have to grow—so the sooner, the better.

Key Takeaways

10 Simple Ways To Manage Your Money Better

Multi-ethnic couple planning their home budget

LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She’s been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Being good with money is about more than just making ends meet. Don’t worry that you’re not a math whiz; great math skills aren’t really necessary – you just need to know basic addition and subtraction.

Life is much easier when you have good financial skills. How you spend your money impacts your credit score and the amount of debt you end up carrying. If you’re struggling with money management issues such a living paycheck to paycheck despite making more than enough money, then here are some tips to improve your financial habits.

When you’re faced with a spending decision, especially a large purchase decision, don’t just assume you can afford something. Confirm that you can actually afford it and that you haven’t already committed those funds to another expense.

That means using your budget and the balance in your checking and savings accounts to decide whether you can afford a purchase. Remember that just because the money is there doesn’t mean you can make the purchase. You have also to consider the bills and expenses you’ll have to pay before your next payday.

How To Manage Your Money Better

  1. Have a budget: Many people don’t budget because they don’t want to go through what they think will be a boring process of listing out expenses, adding up numbers, and making sure everything lines up. If you’re bad with money, you don’t have room for excuses with budgeting. If all it takes to get your spending on track is a few hours working a budget each month, why wouldn’t you do it? Instead of focusing on the process of creating a budget, focus on the value that budgeting will bring to your life.
  2. Use the budget: Your budget is useless if you make it then let it collect dust in a folder tucked away in your bookshelf or file cabinet. Refer to it often throughout the month to help guide your spending decisions. Update it as you pay bills and spend on other monthly expenses. At any given time during the month, you should have an idea of how much money you’re able to spend, considering any expenses you have left to pay.
  3. Give yourself a limit for unbudgeted spending: A critical part of your budget is the net income or the amount of money left after you subtract your expenses from your income. If you have any money left over, you can use it for fun and entertainment, but only up to a certain amount. You can’t go crazy with this money, especially if it’s not a lot and it has to last the entire month. Before you make any big purchases, make sure it won’t interfere with anything else you have planned.
  4. Track your spending: Small purchases here and there add up quickly, and before you know it, you’ve overspent your budget. Start tracking your spending to discover places where you may be unknowingly overspending. Save your receipts and write your purchases in a spending journal, categorizing them so you can identify areas where you have a hard time keeping your spending in check.
  5. Don’t commit to any new recurring monthly bills: Just because your income and credit qualify you for a certain loan, doesn’t mean you should take it. Many people naively think the bank wouldn’t approve them for a credit card or loan they can’t afford. The bank only knows your income, as you’ve reported, and the debt obligations included on your credit report, not any other obligations that could prevent you from making your payments on time. It’s up to you to decide whether a monthly payment is affordable based on your income and other monthly obligations.
  6. Make sure you’re paying the best prices: You can make the most of your money comparison shopping, ensuring that you’re paying the lowest prices for products and services. Look for discounts, coupons, and cheaper alternatives whenever you can.
  7. Save up for big purchases: The ability to delay gratification will go a long way in helping you be better with money. When you put off large purchases, rather than sacrificing more important essentials or putting the purchase on a credit card, you give yourself time to evaluate whether the purchase is necessary and even more time to compare prices. By saving up rather than using credit, you avoid paying interest on the purchase. And if you save rather than skipping bills or obligations, well, you don’t have to deal with the many consequences of missing those bills.
  8. Limit your credit card purchases: Credit cards are a bad spender’s worst enemy. When you run out of cash, you simply turn to your credit cards without considering whether you can afford to pay the balance. Resist the urge to use your credit cards for purchases you can’t afford, especially on items you don’t really need.
  9. Contribute to savings regularly: Depositing money into a savings account each month can help you build healthy financial habits. You can even set it up so the money is automatically transferred from your checking account to your savings account. That way, you don’t have to remember to make the transfer.
  10. Being good with money takes practice:​ In the beginning, you may not be used to planning ahead and putting off purchases until you can afford them. The more you make these habits part of your daily life, the easier it is to manage your money, and the better off your finances will be.

Without money management, personal finances are a bit of a mystery. This can lead to overspending and living paycheck-to-paycheck. Money management can help you have a better handle on your income and spending so you can make decisions that improve your financial status.

19 Tips to manage your money the right way

1. Set up the right bank accounts

The right bank accounts are critical to your financial success because trying to manage your finances without the right bank accounts is similar to trying to take care of your car without the right parts. You’ll need to set up checking, saving, and investment accounts.

These are the building blocks of financial success. It is important to get both a checking and savings account so that you can easily separate your spending cash from long-term savings. Simply leaving your savings in your checking account makes it all too easy to accidentally spend your hard-earned savings.

2. Take stock of your current financial situation

Although it might be scary, you can’t improve your financial situation unless you take stock of your current situation. So you need to be brutally honest with yourself about any outstanding debt or high expenses that are hurting your budget.

3. Make a plan for your money

Without a plan, it is extremely easy to find yourself short on money because it can make it easier to overspend. After all, the treat yourself logic is tempting to embrace. If you say yes to too many unnecessary expenses, then you might be disappointed with your savings. In order to combat this, take the time to make a budget.

4. Set the right financial goals

If you are getting serious about your money, then setting goals is one of the most important money management tips you can use! Creating financial goals will help you stay focused and motivated towards where you want to be financially.

There is no wrong answer, but you’ll need to take a minute to think about your plans and how money would factor into them. Once you have an idea of how money will play into your life, make clear and specific goals for your money.

5. Check-in with your finances every day

You can’t make progress without knowing where you stand because you won’t know where to start. Take five minutes every day to check in with your budget. Are you overspending? Are you right on track? It’s important to know because then you can make adjustments where necessary.

It might sound tedious to check into your financial situation every day. However, it doesn’t need to take a long time. Use an app or spreadsheet to quickly determine how you are doing financially and get back to your life.

6. Cut back on your expenses

As you start to look more closely at your finances, first take a look at your spending. Look for expenses that you are able to cut out of your monthly budget. Even cutting an unnecessary expense of just $20 out of your budget can lead to a savings of $240 for the year.

Manage your money infographic 1

7. Take a look at your income

This might seem obvious, but it is important to understand exactly what you earn. So take a minute to determine your net income after taxes, not just your gross income. You’ll be more able to accurately budget with this number.

Another way to boost your income is to negotiate your salary. Don’t be afraid to approach your supervisor with data that supports your request for a raise. You never know what they may be able to offer.

8. Create a plan to pay off debt

Debt is a huge financial burden. Not only does it affect your current budget, but also your savings for the future. Take your debt seriously and make it a priority to pay down your debt.

9. Understand your credit score

Your credit score is a three-digit number that can have a big impact on your finances. Lenders are willing to offer borrowers with high credit scores better loan terms and lower interest rates. As you apply for large loans such as a mortgage, a small interest rate reduction can save you thousands of dollars.

Take action to improve your credit score. Start by pulling your credit report to check for any errors and use a credit monitoring service to prevent any future mistakes. Other ways to improve your credit score including making on-time payments and keeping your credit utilization rate low.

10. Build an emergency fund

Typically these emergency expenses are accompanied by unpleasant events such as a hospital visit or job loss. You never know when an emergency will appear in your life, but you can prepare for it. Make it a priority to put money into your emergency fund with each and every paycheck.

Many experts recommend saving three to six months of expenses in your emergency fund. However, this will depend on your risk tolerance. If you would feel better with more saved, then you can add more to your emergency fund.

Set up a separate savings account to store your emergency fund. Otherwise, it is too easy to spend these funds. When an emergency strikes, you won’t have to worry about the financial side of the equation. Instead, you can focus on the emergency at hand. You’ll thank yourself later for taking this step.

Source:

https://www.investopedia.com/articles/younginvestors/08/eight-tips.asp
https://www.thebalance.com/ways-to-be-better-with-money-960664
https://www.clevergirlfinance.com/blog/how-to-manage-your-money/

Categories: Uncategorized

Leave a Reply

Your email address will not be published. Required fields are marked *