“Young adults” may seem like an oxymoron, but it accurately describes the experiences of younger millennials and older Gen Z-ers. If you belong to either group, chances are that you’re still at the relative start of your career path and wondering how you can properly handle your income. At this stage, building your financial knowledge and good money habits are critical for achieving financial success.
Additionally, the pandemic has had significant economic impacts on a global scale. Adapting to the “new normal” means taking these changes in stride and applying the learnings to your long-term plans. Below are 15 tips that can help you jumpstart your financial journey.
- Monitor where your money goes
Finding that you’re out of cash and not knowing why is one of the biggest mistakes you can make. Instead, get a better hold of your finances by tracking all your expenses. You can keep a record by using spreadsheets, mobile apps, or even in an old-fashioned notebook. The goal is to identify where you’re spending your money and how often.
- Start planning your finances
Establishing a plan can give you the direction you need to start getting your finances in order. While it’s a no-brainer to start saving up, ask yourself what you want to save up for and how much you need.
Think of specific goals you have for yourself: Do you want to secure your first million before 40? Are you looking to start your own business? These things will give you what you need to work towards.
- Create short-term and long-term milestones.
With every plan comes the steps to help achieve your financial goals. A key point in creating your overall financial plan is to give yourself short-term and long-term milestones. This makes it easier to track your progress and breaks down a big goal into smaller, more manageable steps.
Additionally, short-term milestones make it easier to build momentum and stay committed to the plan.
- Make a budget and stick to it
Another essential step to managing your funds is to maintain a monthly budget. Take note of your essential expenses—utility bills, groceries, rent, and the like—and then start allocating your money. There are plenty of budgeting techniques available: envelope system, 50-30-20 rule, reverse budgeting, and so on. It’s a matter of trying and finding out what works for you.
- Create an emergency fund
One of the money lessons from COVID-19 is that there will be rough spots you can’t anticipate. Having an emergency fund gives you a way to cover your basic needs or a sudden and urgent need without compromising your finances. Depending on your industry and the specific nature of your job, your emergency fund should be able to cover 3–6 months’ worth of expenses.
- Get rid of bad debt
There are two kinds of debt: good and bad. Good debt is debt that will eventually pay off, such as mortgaging for a rental property or taking a loan for your education. Bad debt is debt that does more harm than good to your finances, such as credit card debt.
Work to settle your bad debt as quickly as possible so that you can start on your goals with a clean slate. There are different approaches to paying off debt, so finding one that works with your situation is best.
- Live within your means
At the end of every month, do you find yourself with little to no extra money? Is it hard for you to save up due to your expenses? You may be spreading your income too thin. Eliminate unnecessary costs and cut back on impulse purchases. If cutting back does little good, consider taking on a side hustle to augment your income.
- Think twice before purchasing
Seeing reduced prices in stores can tempt you into buying something for the sake of a “good deal.” However, you still end up spending money on something you don’t need. Approach shopping with a more critical mind. Ask yourself if you need the item, what you will use it for, and if it’s necessary to buy it at this moment instead of planning the purchase out.
- Prioritize value
Value isn’t found in price alone—something that is cheap can break down twice as fast. On the other hand, something may be more expensive upfront but can last for longer. Do your research before buying an item to ensure you’re getting your money’s worth. Avoid the urge to buy something just because the price is slashed.
- Look out for good deals
Unless you have a sudden and urgent need, start canvassing options for your planned purchase. Finding the right item that gets the job done without breaking the bank can help you save in the long run. Keep an eye out for sales and other promos that can further reduce prices on good products.
For big-ticket items, be smart with installment buying. Not only does it allow your budget to be more flexible, but the right provider can give payment terms that won’t stress you out.
- Find cheaper alternatives
Making lifestyle changes can lessen your spending, giving you more money to work with. Find more cost-effective alternatives like home-cooked meals over takeaway deliveries and at-home workout routines over gym memberships. Instead of buying replacements, try to borrow, repair, or repurpose items.
- Consider your career path
Your career has a direct impact on how much money you can earn. Take note of the factors that can affect your income: industry, organizational structure, core competencies, skill levels, etc. Start planning how to further grow your chances of getting a bigger paycheck.
- Jumpstart your investments
It’s not enough to save your money in the bank. Putting a chunk of your money into investments can help it work for you, leaving you with a larger amount at the end of the day. In the current market, there are various types of investments that cater to different risk appetites. Take your time to decide which one aligns with your financial goals.
- Protect your health
Your health is what enables you to work, be with your loved ones, and enjoy life. It should follow that you need to invest in it, as well. Look for an insurance provider with fair rates and benefits that suit your needs. Investment-linked insurance policies give you ways to protect your health and the financial tools to invest, at the same time.
- Treat yourself
Working towards your financial goals shouldn’t make you feel bad or miserable. Celebrate your milestones or allow yourself a small amount for indulging in something you like.
Whether it’s a cup of expensive coffee, treats from your favorite cafe, or a collectible you’ve waited for—you deserve to enjoy the fruits of your labor. The key is to keep your wants in check to balance out your needs.
Start Young
Starting on your finances early gives you more time to learn and increase your gains. By the time you retire, you’ll thank yourself for planning and making things easier. However, life should be enjoyed, and a financial plan that makes you feel the opposite isn’t good either.
With discipline and commitment, these tips will help you reach your goals and achieve the financial independence you deserve.
