Have you got your first job or looking for one? Congrats if you’ve got your first month’s salary. Are you planning how to spend it? Hold on! Before you start splurging, think for a moment! Your present financial behavior will decide your financial future.
Here are 6 tips for young adults to manage their personal finance for a better financial future.
1. Develop healthy financial habits
If you build healthy financial habits now, then it’ll stay with you lifelong. So, develop the habit of tracking your expenses by using a basic spreadsheet. It will help you analyze your spending habits and it’ll bring transparency to the budget you plan. Each and every month, as you update the spreadsheet, you get to know where you went wrong and what you need to do to improve your budget or make changes in your habits if required.
2. Try to save one-third of your income
I know, it seems tough to save one-third of your income, especially when you get married or have a child. However, if you’ve already saved a significant amount, it’ll be easier for you to tackle different phases of life. Saving a big amount may mean to you making some sacrifices of some indulgences in life, but think it’s a short term and it’ll take you towards your ultimate goal – which is financial security.
3. Learn self control while using credit cards
Most of you know this from your childhood that you need to practice self control to build a financially secured future. If you make a habit of purchasing through credit cards, then you’ll have a higher chance of incurring credit card debt, irrespective of whether or not you pay off your outstanding balance at every billing cycle.
4. Start saving money into an emergency fund
It doesn’t matter whether your starting salary is less or you have to repay your student loans, you should also start contributing towards building your emergency fund. Even if it’s a small amount, build an emergency fund and contribute a percent of your income into that account. It will help you keep yourself out of trouble during financial emergencies and you’ll also have a better sleep at night.
5. Repay your student loans early
You should repay your high interest student loans early. It might not be possible to pay chunks towards paying off your student loans when you start your career. However, you should continue with slow and steady monthly payments. And once you have saved a considerable amount in your savings account, pay off bigger chunks towards paying off your student loans.
6. Think and plan your goals
Saving becomes easier when you have goals to achieve. So, before you start saving, make a list of your goals, such as, buying a car, buying a house, etc. After you list your goals, give realistic dates to achieve the goals. To do so, consider your age, income, your debts and other financial obligations, tax rate, etc. By doing so, you can figure out your current financial situation and can plan to achieve your goals accordingly.
If required, you can take help of a financial adviser to figure out how you need to invest in order to achieve your goals within your set time period. If you follow these tips right from young age, you’ll be able to build a secure financial future and a stress free life.