Starting your career as a young adult will be one of the most exciting time periods of your entire life. Apart from beginning a completely new phase, it’s the time you start earning your own money for the very first time! After at least eighteen years of depending wholly on your parents, having your own spending money is a liberating feeling. However, in all your years of education in school and possibly college or university, one thing you might never have been taught is personal finance. Due to this oversight, managing your earnings might prove to be very tricky. Many young adults struggle with balancing their paycheck and end up with little to no savings accrued during a time when you had the least personal commitments. By the time you start to read up on financial tips, you might be drowning in loans with no savings to bail you out.
Here are 5 financial tips for young adults that would help you manage your income:
1. Exercise Self-Control
As you see your bank account top up with cash that’s entirely yours, the temptation to spend it all will be at an all-time high. For young adults at their first job, pressure to give your family and families a “first salary treat” will also be high. Exercising self control is the best financial tip and it is crucial from your first salary itself as it will set the tone for your life as a young adult. You need to stretch your entire paycheck over at least 30 days so take it easy during the first week. Don’t make dramatic changes to your lifestyle from the first month onwards.
2. Budget and Track Your Expenses
Creating a budget even before you get your pay will really help you manage an entire month’s worth of expenses properly. Budgeting is usually a trial and error activity for young adults as they try and figure out what their average monthly expenses build up to be. Firstly, set aside a portion for savings and then your fixed expenses (mobile and internet bills, household contribution, traveling expense etc.). Leave a good amount for yourself - to have fun, go on trips and for shopping. Don’t forget to track your expenses over the course of the month to help you fine tune your budget for the upcoming months. You may find a list of mobile applications here which will help you in tracking your expenses: https://www.shopback.my/blog/i-tried-free-apps-to-find-the-best-expense-tracker-app-for-you
3. Establish a Separate Savings Account and an Emergency Fund
The importance of savings cannot be stressed enough, especially for young adults. Financial stability begins with your savings, and not how much you earn. A young adult with savings is more financially stable than one with a larger salary but no savings. Open a separate savings account (ideally with no debit card) and transfer an amount to that immediately as you get your salary. If you are able to, open up an emergency fund as well at your earliest. The idea behind having an emergency fund is that you will not need to dip into your savings in case of any emergency (like a small medical test, unexpected purchase etc.).
4. Set Aside a Small Fund for Investments
Financial tips on learning how and where to invest your money wisely can be a gamechanger for young adults. Investing helps you create multiple revenue streams and bring you passive income. However, you need to only invest money that you can afford to lose. Therefore, starting a separate fund for investment is something that should be done as young adults.
5. Be careful about lending your money
Be wary of friends and distant relations who might approach you for loans now that they know you are earning your own money. Giving loans to others rarely ends up well for you, as those who borrow money once tend to borrow money again and again. You might end up having to take loans of your own to cover your expenses and being in debt as a young adult is unwise.
If you are looking into financial tips for managing your income, it means that you are concerned about where your money goes and how you can earn more. Financial knowledge is crucial for young adults, no matter what profession or industry your career might lie in. It’s never too late, or too early, to brush up on financial tips.