Managing your finances is tough no matter your age. Check out our list of tips on money management for young adults for advice on how to avoid some of the more common pitfalls and work towards financial stability:
Tackle Your Debts Now
More than half of student loan holders are under the age of 39, and that can be crippling when starting out your life after college. While it may be difficult to make payments towards your debts (especially if you have not landed your first “adult job”), doing so is a key part of investing in your future.
Prioritize your debts according to how damaging the interest rate is and pay off the ones with higher interest rates one by one. Those are the ones that will hurt you more the longer they sit there, so getting them out of the way as quickly as possible will help you reduce the total amount you pay back over time – and you’ll feel motivated once you pay off one loan to continue working towards the other ones!
Make a Budget – Then Stick to It!
So you’ve created a realistic budget to help you meet your financial goals, and next comes the hard part: sticking to it. One of the most common obstacles in money management for young adults when trying to stick to your budget is overspending, but that can be controlled with a few minor adjustments.
One tip to controlling your spending is to use cash. It’s so much easier to overspend when all you have to do is swipe your card or tap your smartphone at the register. Yes, going to the bank and withdrawing your set spending amount is inconvenient, but that’s sort of the point.
If you make spending money less convenient and more tangible, you will allow yourself more time to consider your purchases and decide if what you’re looking to buy is truly necessary or not.
Fight Lifestyle Inflation
Lifestyle inflation is the increase in your cost of living after you land a job that enables you to do things like buy unnecessary items or eat at expensive restaurants more often.
It’s easy to fall into the trap of spending everything you make – especially when you start making more! But don’t lose track of your long term goals – fight the urge to live extravagantly and try your best to live simply. Your wallet will thank you.
Committing to saving money can be difficult. When that direct deposit hits your account, it’s so easy to think of all the things you “need” all of a sudden that never made it in your budget.
An easy way to get around the temptation to spend money you should be saving is to automate it. Set up a percentage to be deposited in your savings account directly rather than sending 100% of it to your checking account, or check out micro-investing apps like Acorns or Stash. You won’t even notice you’re saving, but you’ll definitely notice the amount that’s added up over the course of a few months.
Don’t Misuse Credit Cards
This one is simple – don’t spend money you don’t have. That’s all there is to it.
Setting rules for yourself on how and when you should use your credit card will help you spend within your limits and use your card to boost your credit score rather than hurt your wallet.
Set Discrete and Achievable Goals
Set goals with deadlines – for example, by the end of the year I will have this much money saved; or I will have my student loans paid off by this year.
Once you set your goals, think about what it will take to get there. What smaller deadlines can you reach in order to achieve your goal by the determined time? If you want to save $5,000 by the end of the year, how much do you have to save each month? If you want to pay off your loans in 3 years, how much will you have to pay towards them every pay period?
Writing down these goals and crossing them off as you meet them can help you stay motivated to keep going – it’s a visual reminder of the progress you’re making.
Life will always throw you curveballs, and there are many challenges young people face today that their parents didn’t – but thinking about finances and following these tips on money management for young adults can help pave the way towards a financially secure and successful future.
Vanessa Baioni is an intern for the K-12 Marketing team.