Managing Your Finances As A Young Adult
After leaving home for the first time, you may find yourself overwhelmed by how to save, track, and manage the money you have, which may not amount to much. Here are some basic tips for independently handling your money and increasing your financial savvy.
Some adults still don't have the hang of budgeting, but getting a jump start now is a good way to make it a lifelong habit. Your budget can be as simple or as detailed as you like; you can keep it in a notebook or ledger, or use an online program or smartphone app. With your income in mind, create categories for rent, utilities and food, which should be your priorities.
Still have money left? Great! Prioritize your spending among your secondary needs, next, such as your cell phone bill, Internet, car payment, insurance, and so forth. If you still have money left, it's smart to put some aside into a savings account for emergencies. Whatever is left after your essential expenses are covered is your "play" money for lunches out, evenings at the bar and other fun activities.
Because a piggy bank will no longer cut it, you need a place to keep your money. Shop around for a free checking account at a local or online bank; while they're becoming less common, there are still accounts that charge no fees. You should also start at least one savings account for your emergency fund. When choosing a bank, make sure that there are a reasonable number of ATMs in the areas you frequent to avoid costly fees.
Open a credit card. No, seriously--ONE credit card. This is a great way to build a credit history, which you will eventually need to secure loans for a home, a car, and so forth. Be wise about your spending, and try to pay off the balance each money to avoid interest charges. In a pinch, your credit card can serve as an emergency fund, but do not use this as an excuse to stop saving.
Until you get used to having so many bills, seek out a system for ensuring that your bills are paid in a timely manner. You may want to set up some bills on auto-pay, which allows the amount due to be drafted from your checking account each month. You can also use an online calendar or smartphone app that will remind you when your bills are due.
Make sure that you are insured, whether through work, school, your parents or a policy you buy on your own. Health insurance is essential; you may feel invincible, but millions of young victims of freak illnesses, accidents, cancer and other conditions you don't want to think about, will beg to differ. If money is very tight, consider carrying catastrophic health insurance. This won't help for trips to the walk-in for antibiotics or regular check-ups, but it will pay for accidents or other events that are, well, catastrophic.
Learn to cope with peer pressure. It's easy for friends who are better-off financially to suggest spendy evenings out or extravagant vacations, but you will have to learn to say "no," or be brave enough to offer an alternate, less-expensive suggestion. You should certainly enjoy your youth and have fun, but not at the expense of your financial security.
Learning to juggle your finances is one of the hardest parts of being on your own, but you can do it with the help of these tips. The earlier you start making smart financial decisions, the better off you will be later in life.
