It’s a common stereotype that young people are more likely to make impulsive buys and carelessly splurge their money. A large percentage of those in their late 20s still find themselves living paycheck to paycheck. The lack of personal finance education is perhaps one of our education system’s biggest downfalls. However, it’s never too late to start learning how to handle your money wisely. Here are 5 financial tips for young adults to manage their money:
Educate yourself on personal finance
Since proper financial lessons aren’t available in most schools, take your education into your own hands. Look up books or podcasts on personal finance and slowly build up your understanding of how money works. It can be surprising just how many adults there are who still have a surface-level understanding about finances. Therefore, brush up on what you know and increase your financial literacy skills.
It’s perhaps the golden rule of saving money. Before you think about saving any money, you need to budget your spendings. Divide your income into amounts that you’re going to spend, invest and, most importantly, save. It might be a good idea to automate this process, i.e., set a system where your bank automatically deducts that money from your monthly income to a savings account. Budgeting will also help build some basic discipline and control your urges for any impulse buys.
Have a savings account for emergencies
Living paycheck to paycheck is a dangerous financial route. Though things might seem to be going fine, times will get tough when you face an actual financial emergency. You’ll sleep a lot better knowing you have an emergency fund that you can use if ever needed. When funding this emergency account, treat it as an expenditure that is non-negotiable. You should not touch the money in there under any circumstances. It might seem redundant at first if your life is going well, but understand that not having a savings is a perfect recipe for bankruptcy.
Learn how to invest
Many adults lack financial literacy, which includes knowledge on how to properly invest. A decent percentage of young people don’t know enough about how investments work and hence choose to not invest at all. Why put money into something you might lose, right? This is an unhealthy mentally to have. Many people associate investing with studying complicated graphs and watching the stock market everyday. As with any new endeavour, do your research. Don’t let a lack of knowledge stop you from trying something with enormous financial benefits. You can begin by looking into a real estate investment trust or mutual funds with low fees. Start small as you build both your confidence and knowledge.
Invest in yourself
Investing is an important skill to have. And the most important investment you put your money into, is yourself. You should spend a reasonable portion of your earnings into taking care of yourself and doing things that will help you grow as a person. When it comes to health, invest in quality foods, a gym membership and a good health insurance. When it comes to learning, invest in classes of subjects that might interest you or books with valuable information. If you don’t spend time taking care of yourself, you won’t be able to appreciate all that money you have saved up.