As Millenials enter adulthood, they will need to navigate the waters of financial freedom, without making any major mistakes that could lead to years of financial burden.
As a new wave of young people enter adulthood, many will find that the hardest part of this transition is money. Suddenly, they’re responsible for their own shelter, groceries, car insurance and anything else that may have been previously covered by their parents. Unfortunately, managing personal finances can be confusing and daunting to new adults, especially when there are unexpected expenses. For this reason, it’s important for millenials to adopt good practices for managing their money as they enter adulthood.
Create a Budget
Budgeting doesn’t mean that you have to account for each and every cent you spend. It’s simply an organized way of understanding how to divide your money amongst your expenses, from most important to least important. Rent, groceries, transportation and utilities are the highest priority. Next in line should be any debts you owe, such as student loans or credit card payments. After that, you can allocate money to things like eating out or going to the movies. However, when you’re just getting started, be aware that you may not have much extra money, so be cautious about overspending. It’s strongly recommended that you never leave yourself completely broke. Always set aside some of your extra money to cover things you haven’t planned for.
As soon as you get your first pay check, it’s important that you start building a savings account. Doing this will help ensure that you have money to cover any emergencies. An ideal goal is to save for six months of living expenses, and the account should be readily available, not locked up in investments. This padding can be of great help in the event of car trouble, medical problems or if you happen to lose your job. If six months is too high a goal at your current income, shoot for at least three months’ living expenses. Don’t stop saving there, though. The more money you have in savings, the more financially secure you will be.
Pay Into a 401(k)
In all but a few situations, it’s wise to pay into your employer’s matched-contribution 401(k) program or something similar. If you hold off on this, or don’t do it at all, you could be losing out on a lot of money that would have otherwise been useful during retirement. Plus, if your employer matches your contributions, that is basically like getting free money. While it might feel ages away, don’t put off saving for retirement—even if it is just a little bit at a time.
Avoid Accumulating Credit Card Debt
A credit card can be an excellent way to develop a good credit record, and it can even qualify you for useful rewards or help you out in an emergency. However, it’s absolutely critical that you don’t spend more than you can actually pay for, which is a common mistake. It’s all too easy to treat a credit card like a cash loan, then only make the minimum payments once the bills come due. All this does is accrue interest charges, which can make your debt even more daunting to pay off. Furthermore, making only minimum payments gives negative marks against your credit score, which can make it harder to get a loan or credit card in the future.
Develop a Loan Repayment Plan
If you’re one of the millions of young adults with student loan debt, it’s important to learn how to pay it off with as little interest as possible. Ask yourself these questions:
- Can I take advantage of student loan forgiveness programs?
- Should I consolidate my debt?
- Am I able make higher than minimum payments to help pay off my debt faster?
As you learn to responsibly handle your debt, you can avoid large payments hanging over your head for years to come. Rather than putting off payments until a later date, pay it off little by little, and do what you can to consolidate, make higher payments, and take advantage of forgiveness programs.
Regardless of whether you’re earning a modest living or a six-figure salary, dealing with money is rarely easy. When things get too confusing, it’s recommended to ask someone you trust for help, like your parents, friends, or even an agent at your bank. We also live in an amazing age of technology, and there are countless financial apps literally at your fingertips waiting to help you.
Adjusting to the new financial responsibilities of adulthood can be overwhelming. However, in order to be successful in life, it’s necessary to learn to manage your money well. By following these tips, new millenials can enjoy a more financially stable and secure adulthood. The information for this article was provided by the cash advance experts at Power Finance Texas.
Do you have any good money tips for young people?
Are you worried about making financial mistakes as a young adult?
Have you already learned tough financial lessons in your first years of adulthood?