Do you sometimes wonder why youths of today accumulate huge credit card debts? The answer is simple; it is due to the absence of a well-structured/planned financial life. Many individuals make the mistake of spending recklessly with their credit cards. This leads them to spend out of their budget and accumulate excess debt. We have outlined simple and easy financial management tips below that can help you change the way you invest money.
20 Personal Money Management Tips for Young Adults
Avoid Credit Card Debt
In the United States, credit card debit has put many people into debt. It destroys your savings plan and also your financial prospects. You need to prevent the excess use of a credit card. Always ensure to make payments early to avoid high rates on interest. Credit card debit will take a long-term process and is may destroy your financial plan.
2. Purchase Items from Thrift Stores
Managing your money takes proper discipline. In order to save your money, buy already used items that are still in good shape. For instance, properties like furniture, cars, etc. are better purchased when they have been used in order to save money. In addition, individuals who love fashion should purchase designer wears from thrift stores at an affordable price. This may take some time, but it is definitely worth it.
3. Begin a Retirement Plan Now
The current economic situation is an eye-opener to set aside a proper plan for your future. This should be carried out from the beginning of the job. You need to discover if plans are made for your retirement, e.g. the 401(k) plan for retirement. This is a type of retirement plan that the employee can put his/her donations on a pre/post tax process. Employers who are using this plan are not left out as they can make their donations for their employees and even add profit. In the next 5-15 years, the amount of money saved on your behalf will be impressive.
4. Open an Emergency Account
It is pertinent to save for unforeseen circumstances. Try as much as possible to save some amount of money from your income for this plan. This account should only be used when there is an emergency. For example, emergency situations like accident, sickness, business start-up etc.
5. Open a Savings Account
Rather than having extra cash that might be spent carelessly, opening a savings account is a better option. Never adopt the habit of putting money in your drawer, or the account for your expenses, because you will end up spending it. Mandate yourself to put money in this account every month because it will help you save your money. An agreement between you and your employer can be reached to pay some amount from your salary into the account. This will help you save effectively.
6. Have an Extra Source of Income
Always look for extra ways of making more money to handle miscellaneous expenses. There are numerous ways of making this extra cash online. Skills such as graphic design, writing etc. can be used to earn extra cash online if utilized properly.
7. Calculate your Tax
From your first paycheck, you need to understand the basis of income taxes assigned to you. Firstly, when you receive your paycheck, calculate the money remaining and analyze it to check if it meets with your responsibilities and goals. You can use Paycheck city which is an online calculator to make the calculations easy. It will help check the tax, gross income, and your net income.
8. Health is Important
Apply for health insurance to cover your health emergencies at an affordable rate. Emergency cases such as fractured bones/knees, surgeries etc. can be very expensive to handle especially when you are not insured.
Try as much as possible to compare rates and get the best health insurance prices available. There are also natural ways of living a healthy lifestyle that pays in the long run such as; drinking plenty water, consuming vegetables and fruits, exercise, maintaining a proper weight, and not smoking or taking hard drugs.
9. Protect your Financial Investment
Always protect your financial investments to sustain it. When renting out your properties, use a renter’s guide to cover bad cases such as fire incident or burglary. There is also the disability-income insurance that covers you in situations when you cannot work for a long time as a result of an accident or ill health.
10. Set Achievable Goals
Saving your money can be very difficult. It often requires financial discipline and dedication. According to 26-year old Ross Lawrence who is a personal finance advisor in the Missouri-based Hoffman Financial Resources, he stated that graduates in their 20’s over-hype their value. Graduates in this age acquire plenty debt and expect to get a good job to clear the debt. They have to remember to prioritize because acquiring properties like flashy cars, house down payments and diamond jewelry will sink you into a web of debt. You need some time and dedication to acquire these things you crave for.
11. Live at Home if you can stand it
For some individuals that are low-headed, it is advisable to live with your parents to enable you to save money. If that is so much of a big deal, it is understandable if you choose to live on your own because of the potential freedom.
12. Spend Less than your Income
You have to spend less than your income. This may sound easy, but many young people do not follow this pattern when it deals with their finances. A financial planner Sean Nisil from San Diego and the owner of the blog intentional stewardship, states that you should create a formal budget and spend less than your earnings. This has been proven to be effective in financial stability.
13. Create a Budget
A budget should be created to help you spend less than what you earn. This budget also has to be taken seriously. Sean Nisil also advises the use of Mint.com. It helps to send out email alerts and update you on your budget and expenses.
The C.E.O and founding partner of Lexion Capital, Ellie Kaplan, who owns one of the 100% woman-acquired management firms in the United States, advised on a 50-30-20 budget plan for young people. For instance, 50% should be used on necessary things like payments, student loans, rent, bills, groceries, etc. 30% should be used on your spending and the remaining 20% should be saved. This should not easy especially when you live in a city like New York where almost 50% of your income goes to rent.
14. Monitor your Spending
Calculate how much money you spend in a week as this will help you to be committed to your budget plan. The founder of Wisconsin-based Serenity Financial Consulting, Alan Moore states that the common thing with most wealthy individuals is that they know how much money that they spend. Spending less than you earn can be possible if you monitor the amount of money spent weekly. Ensure to write down all expenses no matter how small they might seem, to track your expenses.
15. Attach Savings Before your Wish List Spending
In order to plan a healthy budget plan, make sure you prioritize. This will help you to protect your finances.
16. Open a 401(k) Retirement Plan
Check if your employer offers you the opportunity of having a 401(k) retirement package. If it is available, sign up for one now. This will automatically give you the chance of saving a particular amount of money from your salary. This money kept aside can be used for any investment of your choice. The value of this money also increases with time.
17. Make Proper use of Free Money
You may be lucky to have a generous employer who will contribute money to your 401(k) retirement plan. This should not stop you from putting your own personal savings into this retirement plan and also receiving the free money from your employer. Another valid example of free money is when your employer covers your travel and lunch expenses.
18. Open a Brokerage Account
After opening a savings account, any spare money should be used in investing in the stock market. It is either you invest your money in aggressive stocks or a conservative mutual funds. Kindly note that the savings and the brokerage account are completely different from each other. A savings account is much less risky than a brokerage account. Any investment made in the stock market should be done with careful analysis of the market. It is normal to expect stocks to grow in the stock market, but also bear in mind that this comes with risks as you can lose all your stocks in a short period of time if your stocks should lose its value in the stock market.
19. Buy Dividend-Paying Stocks
When you have decided in opening a brokerage account in the stock market, make sure you put your money in a stock that pays dividends. This dividend can be explained as a small part of a company’s finance that is shared quarterly, depending on how much of the shares you own in the company. A vivid example in a company’s earnings is if you own 100 shares and the dividend is $0.44 per quarter, you will earn $44.00 per quarter as your gain.
20. Modify Everything
The Missouri-based Hoffman Financial, Ross Lawrence, mentions the need for creating alerts with an automatic bill-paying or budget website that monitors your expenses and budget. This is very necessary because it is one of the important components of monitoring your credit. It is very reliable and easy in tracking late or missed expenses. This can alert you in making payments and also prevents annoying bank charges.
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