It is unfortunate that personal finance is not offered in most high schools across the United States. It is safe to say, then that most high school students don’t have a clue about money management. For that reason, by the time, they reach to the college level; they may find themselves in financial trouble, not being able to distinguish the wisdom of using money wisely. Instead, with a precarious mentality, especially if parents pick up the tab while students are in college, there will be disparity of the seriousness of maintaining control of their finances.
Ease of Understanding
If you consider personal finance as something easy to understand, you are not living in the real world. Even adults have a hard time doing so, let alone young adults. If parents don’t set an example for their children, teaching them how money can work for them and not against them, then later on in life, those young adults won’t know what to do. Most adults spend their money shopping and going out to parties. Saving and being cautious about their spending is not something that they take seriously. For help to get started in finally understanding how to save money and be on a safe path to financial freedom, below are several essential things to consider.
1. Financial Self Control
If you are one of the lucky ones, your conscientious parents may have taught you financial skills when you were younger. If your parents did not, then it is not too late to learn, but you have to delay the gratification of shopping and buying things that you may not even need and switch to keeping a good financial head. Even though, credit card purchases allow you to obtain an item exactly when you want it, you still have to pay for it in the long run and it will usually cost you more than the real price of the item. Why? You have to consider the finance charges that the credit card companies charge. This will go towards your purchase, adding on to the actual balance. For example, let’s say you bought an item of clothing for $45 with your credit card. When the monthly statement arrives, the creditor is going to assess a monthly payment to pay off the $45, but the creditor will also adds on some finance charges. If you pay the minimum monthly payment on your credit card statement, you could end up paying three times $45 – $135 for the same item of clothing.
2. No Minimum Payment
One of the main money tips for young adults is learning NOT to pay just the minimum credit payment each month, but pay more than the amount so you can pay the balance off in less time. It will save you in the long run. If you continue to purchase insignificant items with your credit card, it could take you into a spiral of debt. Stay away from this as much as you can. Most debit cards work like credit cards, except that you must have the money in your bank account to pay for anything. So, start using your debit card instead of your credit card so that if there is not enough money in the bank, you will refrain from making the purchase.
3. Automatic Savings
Another one of the wisest money saving tips is to initiate automatic savings. That means, you should go to your employer and ask that your paycheck be directly deposited into your account. You could also authorize the bank to put some of that money into your saving accounts automatically. Many of the banks in the United States have special saving accounts for young adults. Each time that you make a purchase with your debit card, you earn money that goes into a savings account.
4. Read Books
If you want to know more about personal finance, the Internet is readily available with information. Conduct your research online. However, you can also purchase books that give professional advice on how to best save money. It is your responsibility to educate yourself.
5. Where is the Money?
For everyone, not only young adults, it is unwise to be spending more than you make. If there is an expense that you can eliminate from your budget, by all means do so. You should always know where your money is going, even if it is one dollar. Do you know how much money you can rack up by buying coffee every morning while on the way to work? Or the amounts of money you calculate each month that you spend on lunch? Buy a small notebook or journal and start writing down all your spending. With today’s technology, you may be able to download a mobile app that helps you to keep track of your spending.
6. Emergency Fund and Budget
As a young adult, you don’t know when an emergency may occur, so it is best to set up an emergency fund and to maintain a strict budget. Pay yourself first once you receive your paycheck. Use this money to put in your emergency fund, no matter how small the amount is. Keep a spreadsheet of how much money you make and how much you use for expenses. This will help you to be better able to maintain a budget.
7. Early Retirement Savings
While you may have a long way off to reach the age of retirement, you should not wait that long to start saving for retirement. The sooner you begin retirement savings, the better lifestyle you will enjoy when you retire. Solicit the help of a financial adviser to understand the complexities of a retirement plan. However, start by investing in an employer-sponsored 401K retirement plan.
The Bottom Line
It is a given that you will come in contact with money and that you will need it to pay for various things including your own expenses. For that reason, you should respect money and not abuse it