It is crucial for young adults to have an understanding of personal finance and how to manage money in the real world. Since this topic is not required in most high schools and colleges, young adults should take the time to learn about this topic outside of the classroom. For some guidance, these are a few tips that will help you gain some more insight into money and how you can live an enjoyable and profitable life.
Delay Gratification
Learning self-control sooner than later will make it much easier to manage finances. While it is extremely convenient to charge items on credit, you may end up paying more for the item in the long run. Even if you are able to pay off your bill in full at the end of each month, you could still be paying for those items years down the road. Instead, it’s better to wait until you have saved up for that new pair of jeans. You can still keep your credit cards for the rewards they offer and their overall convenience, but ensure you pay your bill in full at the end of the month, every month.
Take Ownership
People love to spend others money more than their own, so if you don’t learn how to manage your own finances, someone else will mismanage it for you. Some of those people could mean well but don’t understand finances themselves, while others could have ill-intentions and are looking to make some money from your naivety. Instead of seeking guidance from others, take ownership of your finances and actively research personal finance and make sure you fully understand how money works and how you can make it work for you.
Create a Budget
It is incredibly important that you do not spend more money than you make. The best way to ensure this is to budget. Knowing where your money goes every month will also show you that some items you don’t necessarily need (like that Venti Macchiato you get every morning), quickly add up. This will allow you to make small changes in your everyday expenses and could ultimately impact your finances in the same way getting a raise would.
Pay Yourself First
Creating a savings account or emergency fund will save you extra stress and heartache in the event an emergency occurs and you have a big bill to pay, such as getting into a car accident. No matter how low your income seems, set aside a sum of money per month to contribute to your savings. The Richest Man in Babylon by George S. Clason includes a parable that recommends setting aside 10% of your income a month to pay yourself first. Make this a non-negotiable expense and set yourself up for financial success in the long-run.
Understand Taxes
Understanding how taxes work is vital information you should know before you even receive your first paycheck. You need to know if the starting salary a company offers you will be enough to cover your expenses and meet your financial goals after taxes are deducted. Do some research on this and become familiar with the process. Additionally, you can use a handy online calculator that will show you your gross pay, tax deductions, and your net, or take-home pay.