Dear young adults,
You are currently in the most exciting chapter of your life. In this stage, you might have just flown from your parents’ nests, started molding your dreams, and chasing after them. You tried competing for jobs, received rejections, moved forward, and indulged yourself with your monthly paycheck.
The question is, “how are you going to make your money worthwhile in the long run?” For sure the thought “life is more than just eating and paying the bills” has come across your mind.
Unfortunately, Personal Finance 101 isn’t taught in schools. You might have heard your parents’ sermon about saving up for the future, but for sure you’re still clueless about managing your finances when you’re out in the real world. You are not even familiar with the terms that might save your life in the future.
To give you a little lift, here are five of the friendly personal finance tips that might help you.
1. Set goals
Personal finance has two main parts – planning and acting. You are at the stage of your life where instant gratifications and the deadly threats of consumerism are ready to devour your income. Save your wealth by establishing a goal for yourself and adjust your lifestyle to stick to it.
The first thing to do is set a realistic goal. Have an evaluation of your current and future cash flows, asset values, and withdrawal plans. Understand how income taxes work before you get your paycheck. No specific template is used in planning since it all depends on your future life goals and future expenses.
After planning, work towards achieving that goal over time. Budget your finances. Live below your means. Track where your money goes. Make sure that your expenses aren’t exceeding your income. Take out loans, as cash loans or mortgage, you can afford. Pay your bills on time and in full to avoid getting buried in debt.
2. Start being financially literate today
According to the Filipino financial expert Francisco J. Colayco, “financial literacy is not about numbers – it’s all about mindset.”
Even with low income, you can thrive in life if you have a clear mindset. To help you change the way you think about money and get the best out of life, you must constantly feed your mind with new information and ideas.
Start by having a keen interest in reading. Erik Tyson’s “Personal Finance for Dummies” is a great help for readers with limited knowledge of personal finance. The book presents objective information from the basic concepts and terms about budgeting, investing, and credit to improving one’s net worth.
Books like “The Millionaire Next Door” and “I Will Teach You To Be Rich” also has simple “how-to’s” and lessons to help the younger generation develop good habits and thrive in the next years to come.
An uncountable number of good finance blogs and websites can also be accessed online for free pieces of advice from experts and everyday people with huge insights to share. Some of these websites are Kiplinger, Investopedia, Bankrate, and Wise Bread.
3. Use technology to your advantage
You’re lucky to be born in the age of technology. Your smartphone can be a powerful instrument in managing your finances in a more convenient manner. Downloading and using mobile apps is just a few clicks away.
One of these apps is Mint. It is a mobile app that gives a real-time and complete look into all your finances from bank accounts to credit cards and even shares some saving tips. Another app that tracks your finances is Level Money, which looks into your income and recurring bills and suggests what your daily, weekly, and monthly expenses should be to become a wiser saver and spender.
If you want to check how your credit file is doing, Credit Karma is a must-have. The app offers free credit scores and reports and allows you to monitor your spending patterns by linking it to your credit card and bank account. The app also recommends better credit card loan offers to improve your finances.
4. Secure an emergency fund
Life often plays a little game on us. Emergency often strikes when you’re empty-handed, making you spend months of savings for a week of hospitalization. Therefore, it is wise to have some amount of money in an emergency fund.
Instead of putting it in a glass jar, put it in a high-interest savings account, a money market account, or a certificate of deposit account and let inflation increase the value of your savings.
Another way to guard your health and wealth is buying insurance. Whether it’s for health or for tangible assets, insurance can act as your protection from financial loss.
5. Think about your retirement
You might think it’s too early for retirement plans since you’ve only just begun enjoying fun part of adulthood. However, sooner you start saving, the sooner you’ll be able to consider working as an “option” rather than a “must.” This is made possible by compound interests, which increases through the years.
If you look closely at these five tips, you’ll see that they all focus on starting today. Because “today” can never be brought back. The sooner you learn to control yourself and acquire knowledge about handling money effectively, the sooner you’ll have your finances in order.
If you think you’ve saved a good amount in your accounts, then perhaps you can have a nice glass of wine and celebrate the fun of being a young adult.
Author Bio: Mina Natividad is a resident writer for Quick Cash Loans, an Australian-based business, providing short-term cash loans for your borrowing needs. She is passionate about writing articles regarding personal finance and money hacks.