Tips for Saving as a Young Adult
The "young adult" phase of life is important for many reasons. It's during this time that people enter college or the workforce. Some young adults may even start families or venture into entrepreneurship at this time. No matter how this period plays out, there is one common truth about the young adult years - they are the most pivotal years for investing and saving for the future.
Learning how to manage money, apply for credit, and practice habits to stay out of debt are all important in understanding how personal finance works and how it will affect the future. To help our customers start out on the right foot, we are offering these tips for saving money as a young adult.
Tip #1 – Control Your Spending Impulses!
It's easy to spend your money on everything under the sun in today's world. Your Facebook app tracks every interest you have and tempts you with targeted advertisements on a daily, even hourly, basis. Online retailers offer quicker-than-ever shipping and utilize FOMO (fear of missing out) to their advantage. Now, more than ever, it is important to fight the urge of the impulse purchase. For any purchases you do make, however, it is important to avoid using your credit card! It's a common habit to tell ourselves that we'll pay off our high dollar purchases right away, but before you know it you will have accumulated debt that you could be paying off for up to 10 years or even more. Pay for purchases in cash or with your debit card as much as possible, and if you do use your credit card, pay off your balance in full when the bill arrives. Limit yourself to one credit card as well!
Tip #2 – Keep Your Eyes On the Road Ahead
People close to you (or other parties interested in gaining something from you) will attempt to give you financial advice at a continuous rate during your young adult years. Your family might try to convince you, good willingly, to purchase a home, a new car, or even attend college when you otherwise might not have planned to do so. Other parties might try and persuade you to invest in business endeavors by trying to convince you that you'll get rich quick. Whatever decisions you make, it is important to make them with a sound mind and future-focused vision. Educate yourself about personal finance so you can make informed decisions, evaluate your opportunities, and avoid any schemes or pitfalls.
Tip #3 – Budget, Budget, Budget
Learning how to budget is one of the most important personal finance skills you can acquire as a young adult. This means keeping track of your spending by being mindful of where you spend your money, how much you spend, and when. Learning how to budget will help you avoid spending hundreds of dollars a month on takeout food or daily lattes. No one is telling you not to have fun or enjoy yourself, but adhering to a reasonable budget will stop you from throwing your money out the window repeatedly. There are plenty of online resources or books to help you learn how to budget, and there's no shame in utilizing them to educate yourself about good spending practices.
#4 – Set Aside Money For Emergencies
Nothing can derail a sound financial plan like an unexpected large expense. Your car might breakdown or an injury could force you away from work for a while. Situations like these can bring you back to square one in the blink of an eye.
There is a popular phrase in personal finance, "pay yourself first." No matter how much you might owe in bills, student loans, your car payment, or anything else, it is important to set aside a specified amount of cash each month for emergencies. The best thing about this cash? If you don't use it or wind up needing it, you can apply it towards a vacation, retirement fund, or even a down payment on a mortgage! An even wiser decision is to invest your emergency cash into a CD account, savings account, or money market account to gain interest!
Tip #5 – Start Saving For Retirement As Early As You Can
We know it's hard to picture yourself in retirement during your young adult years, but hear us out. Just as you enter high school or college with the goals of preparing yourself for your future, so should you enter young adulthood preparing for your elder years. Educate yourself about compound interest to learn how savings and investments work so you can acquire enough capital to retire. The sooner you start, the sooner retirement becomes an option rather than a necessity! If the company you work for offers a 401k, sign up! Many companies will even match your contribution, doubling the amount of your investment!
Tip #6 – Learn About Taxes
The word "taxes" might have frightened you upon reading it, but there's nothing to fear about this tip. It is important to educate yourself about how income taxes work when it comes to your earnings. For example, a $35k yearly salary in New York City boiled down to just over $26k after income taxes in 2016. And the thing about taxes is, they are always changing! It's important to understand how income taxes work in your area so that when you receive an offer, you know what you're getting! There's no way to avoid Uncle Sam, but knowledge is still power, so the more knowledge you have about your finances, the more power you have over them!
Tip #7 – Guard Your Assets, Including Yourself!
You may not think of yourself or your property as assets, but they (and you) most definitely are! Health insurance is the law of the land, so make sure that you enroll yourself in a health insurance program that offers a reasonable rate while providing the best coverage possible. This will protect you from huge expenses in the event you are injured or become incapacitated from the ability to work.
Along with yourself, it is important to protect your assets. Renter's or homeowner's insurance will provide financial protection for your property and valuables in the event of a natural disaster or a burglary. You can find help in protecting yourself and your belongings by seeking out the assistance of a financial planner.
You don't have to be a certified expert to gain an understanding of the importance of personal finance. Knowledge and education, such as the basic tips we've provided, go a long way in preparing for your future. There are plenty of resources available to you both online and in-person to help you get a grip on your financial well-being, so be sure to use them!
If you need personal assistance in planning for your future, be sure to stop in and meet with the financial planning experts at Waldo State Bank! Our staff is ready to help you start off on the right foot towards achieving both your short-term and long-term goals, as well as protecting you from unforeseen setbacks. Personal finance isn't scary unless you find yourself unprepared! Plan, prepare early, follow these tips, and you'll find yourself ready for a comfortable, enjoyable retirement that others will envy!