As a young adult, you are currently in the most exciting chapter of your life. In this stage, you might have just flown from your parents’ nests, started molding your dreams, and chasing after them.
You tried competing for jobs, received rejections, and moved forward. You experienced that feeling of gratification after earned your first pay and indulged yourself with your money.
Until reality slaps you real hard, making you realize that life isn’t all about short-term gratifications or living from paycheck to paycheck. There’s a huge, mad world ahead of you and you have to either save up or die with wide eyes open in the future. Sounds a little harsh?
Let’s get to the point. Unfortunately, Personal Finance 101 isn’t taught in schools. You might have heard your parents’ sermon about saving up for the future, but for sure you still tend to be clueless about managing your finances when you’re out in the real world. You are not even familiar with the terms that might save your life in the future.
To give you a little lift, here are five of the friendly personal finance tips that might help you.
1. Set Your Goals and Stick to Them
Personal finance has two main parts – planning and acting. You are at the stage of your life where instant gratifications and the deadly threats of consumerism are ready to devour your income. Save your wealth by establishing a particular goal for yourself and adjust your lifestyle to stick to it.
The first thing to do is set a realistic goal. Have an evaluation fo your current and future cash flows, asset values, and withdrawal plans. Understand how income taxes work before you get your paycheck. No specific template is used in planning since it all depends on your future life goals and future expenses.
After planning, work towards achieving that goal over time. Budget your finances. Live below your means. Track where your money goes. Always make sure that your expenses aren’t exceeding your income. If you filed for a credit, make sure to pay your bills on time to maintain a good credit file and avoid getting buried in debt.
2. Start Being Financially Literate Today
According to the Filipino financial expert Francisco J. Colayco, “financial literacy is not about numbers – it’s all about mindset.” Even with low income, you can thrive in life if you have a clear mindset. To help you change the way you think about money and get the best out of life, you have to constantly feed your knowledge with new information and ideas.
Start by having a keen interest in reading. Erik Tyson’s “Personal Finance for Dummies” is a great help for readers with a limited knowledge of personal finance. The book presents objective information from the basic concepts and terms about budgeting, investing, and credit to improving one’s net worth.
Books like “The Millionaire Next Door” and “I Will Teach You To Be Rich” also has simple “how-to’s” and lessons to help the younger generation develop good habits and thrive in the next years to come.
An uncountable number of good finance blogs and websites can also be accessed online for free pieces of advice from experts and everyday people with huge insights to share. Some of these websites are Kiplinger, Investopedia, Bankrate, and Wise Bread.
3. Use Technology to Your Advantage
Millenials are blessed to witness and acquire the best of technology. Your mobile phone can be a powerful instrument in managing your finances in a more convenient manner. Downloading and using mobile apps is just a few clicks away.
One of these apps is Mint. It is a mobile app that gives a real-time and complete look into all your finances from bank accounts to credit cards and even shares some saving tips.
Another app that tracks your finances is Personal Capital, which looks into your income and recurring bills and suggests what your daily, weekly, and monthly expenses should be to become a wiser saver and spender.
If you want to check how your credit file is doing, Credit Karma is a must-have. The app offers free credit scores and reports and allows you to monitor your spending patterns by linking it to your credit card and bank account. The app also recommends better credit card loan offers to improve your finances.
4. Always Be Prepared For Emergency Situations
Life often plays a little game on us. Emergency situations sometimes hit you when you’re in a midst of a financial struggle. They make you spend your one-year savings to pay off a week of hospitalization.
This is why it is wise to have some amount of money in an emergency fund. Instead of putting it in a glass jar that you can easily break, put it in a high-interest savings account. Another option is a money market account or a CD and let interest increase the value of your savings.
Another way to guard your health and wealth when emergencies take place is buying insurance. Whether it’s for life and health or for car and home, insurance can act as your protection from financial loss. Just make sure to take time in educating yourself about insurance, what your options are, and studying these options thoroughly.
5. Think About Your Retirement
You might be thinking that it’s too early to consider retirement since you’ve only just begun to enjoy adulthood. But the fact is the sooner you start saving, the sooner you’ll be able to consider working as an “option” rather than a “must.”
This is made possible by compound interests, wherein the higher the number of compounding periods, the greater the compound interest. This leads to less principal to invest in ending up with the amount you need for retirement.
Start exploring your retirement plan options today. You can contribute to an individual retirement plan or choose company-sponsored retirement plan where the contribution limits tend to be high.
If you look closely at these five tips, you’ll see that they all focus on starting today. Because “today” can never be brought back. The fact is the sooner you learn to control yourself and acquire knowledge about handling money effectively, the sooner you’ll have your finances in order.
So if you think you have saved a good amount in your bank account, then perhaps you can have a nice glass of wine and celebrate the fun of being a young adult.
