Young adults face a number of obstacles as they begin establishing their careers and earning a steady income, often times, for the first time in their life. There may be student debt looming, bills accumulating, or other unexpected financial hurdles approaching. To help you face these obstacles head-on, we have compiled a list of financial planning and saving tips to help you rest easier knowing your money is in order.
1. Set goals for your budget. The average young person lives by the 50-20-30 rule – 50% of their budget goes toward fixed costs each month, 20% of their budget goes toward financial goals they’ve set, and the remaining 30% of their budget is used in flexible spending. The most important aspect of setting a budget is knowing what you want your money to accomplish. Set goals that are specific, realistic, and attainable, and plan your budget accordingly.
2. It’s never too early to focus on retirement. Take advantage of the retirement options your employer offers, whether that be a 401(k) or other savings account. Contribute an amount you are comfortable with – 1% of every dollar you make is better than nothing. Ideally, you will want to work up to contributing enough to receive the full company match. If your employer doesn’t offer retirement plans, consider opening a Roth individual retirement account. These IRAs allow you to contribute after-tax dollars that grow tax-free.
3. Automate. The most effective savings strategy is to pay yourself first. Ask to set up your payroll for direct deposit so that a fixed amount goes directly into your retirement or savings account before it hits your checking account. By automating, you remove the temptation of using that money elsewhere.
4. Audit your expenses and spending habits. Evaluate where your money is going – Do you have too many magazine or streaming subscriptions? Are you spending too much on phone bills or other utilities? Challenge yourself to cancel unnecessary subscriptions. Research other providers for plans or packages that give you the same product for a more reasonable cost. Be proactive, and your budget will thank you!
5. It’s okay to say no. Social gatherings can put a strain on your finances when nights out for dinner and drinks, attending concerts, and buying wedding and baby gifts start to add up. Take the time to plan out your social calendar, noting the important occasions you can’t miss and the ones you can afford to turn down.
6. Cash, please. If you find yourself swiping more than your checking account can handle, try carrying cash only. Once you’ve set your budget and know what you have available for flexible spending, take that amount in cash and refrain from swiping. Seeing the money leaving your hands can have a profound effect.
These tips will help you get started on saving money for your future and set you going down the path to financial success.