The Best Personal Finance Tips for Young Adults
Unfortunately there isn’t a course titled Best Personal Finance Tips for Young Adults in college so you have to self-educate. When you first begin to earn a substantial paycheck for the first time, it is all too simple to spend too much money on luxury items or to put yourself in debt. This is also the prime time to start out on the path towards financial security and wealth. Unfortunately, personal finance courses are not part of the required curriculum for high schools and colleges, but when it comes to money, you can learn a lot from others’ mistakes – instead of making your own.
Here are five personal finance tips for young adults that will enable you to save more and spend smarter:
- Learn to exercise self-control.
Learning to delay self-gratification is an art, and it makes keeping your personal finances in order much easier. Credit cards make it simple to purchase an item anytime you want it, but financial experts recommend saving your money until you have enough to buy it outright. Do you want to be paying interest on a new cell phone or pair of jeans 10 years from now?
If you decide to keep a credit card or two for the rewards they offer or the convenience factor, make it a priority to always pay the bill in full when it arrives. Don’t carry more debt or cards than you can keep track of.
- Don’t put off investing until you “have the extra money”.
If your employer currently offers a 401k, take advantage of it now. Even if you are only contributing 2-3% of your annual salary, each dollar makes a difference. Eventually, you will be able to raise your contributions to 4%, 5%, or even 10%.
Do you need extra motivation to start saving now? Use a retirement calculator, like the excellent one found on Bankrate.com, plug in the numbers, and see an estimate of how much you’ll need for retirement in your golden years. There’s a high chance the number will exceed $1 million.
- Start an emergency fund now.
Regardless of how low your salary might seem or how high your amount of student debt is, you need to find some money in your budget each month to contribute to an emergency fund. Not only does having this slush fund help you sleep better at night, but it will also keep you out of financial trouble. For example, if your washing machine goes on the fritz, you won’t have to go into debt or finance a new one.
- Focus on paying off your student loans with the highest interest rates first.
Student loans with a 5% (or higher) interest rate will cost you significantly more than your savings account would in this low interest rate economy. Paying off your student loans one a time will save you a considerable amount of money as opposed to making slow, monthly payments. Of course, not all young adults will have the capital to repay a large chunk of their loans, but once your bank account is in a healthy state, make it a priority to start paying off those loans.
- Invest in health insurance.
Last, but not least, make sure that you maintain health insurance. Not only is it federal law, but it will protect your financially. Even a visit to the emergency room for a broken wrist can set you back thousands upon thousands of dollars. It can require you to take time off of work, which will lead to a loss of income – further setting you back. Some young adults tend to think that they are invincible, but maintaining health insurance is just smart.
What tips are you using to take your personal finances to the next level? Share with the Young and Finance community!