When you’re young, it may seem like there’s no need to save money — you can always do it later, right? However, while it might seem easy to live your life from paycheck to paycheck for the time being, starting to save now will prepare you for the future and protect you in case of emergencies.
Putting aside just a bit of your money in the bank can make a huge difference — but there’s more you can do than that.
In this article, we’ll cover 20 tips for young adults who want to start their financially independent years on the right foot.
20 Financial Tips for Young Adults
1. Create a Budget
This is probably the most important part of starting your savings — making a budget and sticking to it is a great way to save.
Don’t worry: This doesn’t mean you’ll never have fun in life again. Sorting out a budget will help you track where your money goes every month so that you can allocate your funds to bills, entertainment and savings.
2. Start Saving Early
When you’re not earning much, saving may seem like a big challenge, but setting aside a few bucks a week can still help down the road. You can use your budget to determine how much money you’ll be able to put into savings every month.
If you want to invest, check if your employer offers a 401(k) account. If they do, calculate how much you can afford to contribute from your salary and steadily increase it as you earn more.
3. Set Aside One Third of Your Salary
Many people follow the one-third rule, where they save $1 for every $3 of their income. This makes it easier to weather financial difficulties in the future, including:
Home repairs
Layoffs
Surprise expenses
4. Use the 50/30/20 Rule
This is another simple saving rule of thumb. This method has you set aside 50% of your income for your needs, 30% for your wants and 20% for your savings.
To help with this, you can use a finance app to track your money usage conveniently and accurately.
The 50/30/20 rule is more popular than the one-third rule, but it puts less towards your savings, so be mindful of this when choosing a budgeting method.
5. Build Your Emergency Fund
A great way to support yourself through hardships is to have an emergency fund that you can withdraw from if needed.
Experts recommend placing some of your money into a certificate of deposit, a money market account or a high-interest savings account.
6. Always Pay off Debts
While putting aside some money into a savings account is great, paying off your debts is also important. If you need to pay student loans, your repayments will start 6 months after your studies, so be sure to plan ahead.
It’ll work out better for you if you chip away at your debts as much as you can afford each month, even if that’s more than what’s due. Just make sure that your credit cards are kept in control.
7. Sign up for a Healthcare Plan
Be sure that your health care plan is comprehensive enough for your needs. Even if you don’t think that you have any problems with your health, remember that your parents’ health care plan and the benefits that come with it won’t cover you forever. Many employers offer health insurance plans to employees, however, if you are not able to get coverage through an employer or parents, a great place to research your options and enroll in a plan is to visit the government Healthcare Marketplace.
Once you’re on your own, you have to make sure that you’ll be covered sufficiently, so do your research before you’re in need.
8. Separate Your Needs From Your Wants
Many graduates immediately getting a new car and making other big purchases once they land a job. However, making large purchases is about more than being able to make monthly payments; it’s also about being able to pay your debt.
To help you limit accumulating debt, be sure to live within your means and understand it’s much cheaper to save up and purchase things in full rather than using credit or loans for each purchase.
9. Save for Retirement
You might think it’s too early to think about retirement — after all, you just graduated college, right? But keep in mind that it’s a great time to prepare for your financial future.
Look into company-sponsored retirement plans so you can set aside pre-tax earnings. Many companies offer employer matching on retirement plan contributions which can add up greatly over time.
10. Learn About Taxes
Before you even get your first paycheck, it’s important to know how income taxes work. Once your company offers a salary, be sure to do the math to make sure it’ll leave you with enough money after taxes for your needs.
It’s important to learn how much of your salary will go toward your taxes and understand the difference between your gross pay and your net pay.
11. Protect Your Health
You can lower your chances of spending large sums of money on hospital bills by making sure that your health stays in tip-top shape.
This means eating well-balanced and nutritious meals, regularly exercising, having regular check-ups, and monitoring any conditions you may already have.
12. Learn the Basics of Bank Accounts
Unfortunately, many young people open bank accounts without understanding much about them. While you may never need to write a paper check or get a money order, you still need to learn and understand banking basics, such as:
Overdrawing and the associated fees
Minimum balance requirements
Service fees
How to access your account information
13. Improve Your Credit Score
Now’s the right time for you to start building your credit. Unfortunately, it’s all too easy to make mistakes and get too deep in credit card debt, which will put you on the wrong path financially.
To prevent this from happening, be sure to always pay your bills on time, never max out your credit card if you can avoid it, and only use your credit card for purchases that you can quickly pay off.
14. Set Clear Goals
Listing your goals in writing can help you figure out how to reach them and establish a clear end game to work toward.
To ensure that you keep up with them, you can put them somewhere you’ll always see, like a noticeboard. You can also use a phone calendar to your advantage, where you can set alerts and review your plans whenever necessary.
15. Use a Dedicated Savings Account
This is a great strategy to ensure you don’t spend money that should be reserved for your long-term savings. Be sure to open separate accounts for savings and expenses.
Remember, you can set up an automatic transfer that sends funds to your savings account as soon as you’re paid.
16. Cut Costs Where You Can
Mastering this skill can help you lower your expenses, so be sure to look for ways to set money aside for your savings. This could involve:
Looking for the cheapest places to get groceries
Taking advantage of coupons
Getting cash back from your credit card
You can also look for apps like Groupon that provide you with discounts on food, groceries and household items.
17. Maintain Multiple Sources of Income
While it’s important to keep a lid on your expenses, many experts will recommend that you should focus more on your income. Because there are only so many expenses that you can cut, improving your income has much more potential to boost your financial standing than improving your expenses.
To grow your income, you can supplement your full-time job with gigs and side hustles. If you have skills in other fields or hobbies and interests that you could make money from, now’s the time to use them.
18. Negotiate Your Salary
If you can’t maintain a side hustle, another option you can look into is to ask for a salary increase in your current job. While this might be intimidating, there are things you can do to prepare yourself when planning to ask for a salary increase.
It’s also important to remember that the worst-case scenario is that they say no, and you move on. In the best-case scenario, when they say yes, you’ll have a bit more to save every month.
19. Protect Your Wealth
You don’t want to leave your wealth out in the open — to ensure that your money doesn’t vanish in the blink of an eye, you need to take the necessary steps to shield it. If you’re renting, be sure to get renter’s insurance. If you cannot work for long periods, disability income insurance can protect you from falling into poverty.
Make sure that you also protect your money from taxes by earning high interest through secure investments.
20. Know When to Ask for Help
Many young adults make financial mistakes. Some will encounter bigger problems than others, but that’s okay. It’s important to understand that help is available to get you back on track if needed.
Financial advisors, student loan counselors, credit counselors, and experts from reliable credit unions — like VyStar Credit Union — can help you pull everything back together and minimize your losses.
Conclusion
It’s not too difficult to understand how finances work or how you can take charge of your income.
As long as you apply the financial tips for young adults outlined above, you can prosper and grow your assets for years to come.