Adulting 101: Financial Planning for Young Adults
What to do now?
Congratulations on graduating from school, landing your first job after college, and starting a new chapter in your life! While it’s understandable that financial planning may not be your top priority, taking control of your finances early on can help secure your future. You should not hesitate to prioritise financial planning and pave the way for a fulfilling and financially secure future.
Because having a plan is always better...
If you begin a task without considering the potential consequences, you may encounter difficulties in the future. Being prepared for mishaps allows you to take appropriate action when challenges arise.
Your future depends on the choices you make today. That’s why it’s crucial to pay attention to the following points, they will serve as guiding principles that will help you shape a successful future.
Don’t miss out on the benefits waiting for you! Take a moment to read through them and discover how you can make the most of them.
- Budgeting: Your Financial Roadmap to Increase Savings.
Some people believe in budgeting, while others prefer to spend endlessly without restrictions. Both approaches are valid, depending on personal preferences and financial goals. However, budgeting can be considered a financial roadmap that can help you keep track of your income and expenses.
There are many budgeting methods, but a simple one is the 50/30/20 rule. According to this rule, allocate 50% of your income to essential needs such as rent, groceries, and transportation. Set aside 30% for hobbies, entertainment, and eating out. Finally, the remaining 20% of your income should be put towards savings and debt repayment. Budgeting apps and spreadsheets can be great tools to keep track of your spending.
2. Building an Emergency Fund
Life can be unpredictable, and sometimes unexpected expenses such as medical bills or car repairs can put pressure on our finances. Having an emergency fund can act as a safety net, providing peace of mind and preventing you from going into debt. Try to have at least 6 months worth of living expenses.
You can start by setting aside a small amount of money each week, even if it’s just $25, and gradually increasing your contributions as your earnings grow.
3. Manage Your Debt
Pre-payment is often interest-free for a few months after the loan is disbursed. If you have student loans or credit card debt, it can be overwhelming. The key is to prioritize repayment.
Start by focusing on high-interest debts first, which usually includes credit cards. You can use the debt-snowball method. This involves paying off the smallest debt first and gaining momentum with each paid-off balance. There are also debt consolidation options that allow you to combine multiple debts into one lower-interest loan.
Remember, tackling debt early saves you money in the long run.
4. Invest in Yourself
Planning for retirement may seem like a distant goal, but it is crucial to start early to take advantage of the power of compound interest.
Most employers offer retirement savings plans such as 401(k), which may include matching contributions from the employer. This means that you can get free money just by contributing to your retirement account. Even a small percentage of your paycheck can make a significant contribution to your retirement savings over time.
Doing proper research and seeking guidance from a financial advisor or a friend who is better in this field can help in making informed decisions.
It is advisable to research your options and seek guidance from a financial advisor to help you make informed decisions.
5. Building Credit
A lot of teenagers entering adulthood don't know much about credit scores.
What is a credit score?
A credit score is a number representing your creditworthiness, ranging from 300 to 850. Lenders use your credit reports to calculate them, which include your payment history, types of loans, credit history length, and total debt.
Maintaining a good credit score unlocks numerous financial opportunities, such as securing better loan rates and renting an apartment. To avoid interest charges, pay off your credit card balance in full each month and pay your bills and loans promptly.
6. Financial Planning
Financial planning is not a one-time event but rather an ongoing process. As your life circumstances change, your financial goals will also evolve. Therefore, it’s important to review your budget regularly, adjust your spending habits whenever necessary, and seek professional financial advice whenever needed.
By taking control of your finances early on, you are setting yourself up for a more secure and prosperous future.
CONCLUSION:
Who is this for?
Someone who just got a job after completing their graduation or master’s.
Those living away from their parents face a monthly crunch in their budget.
Or someone who just wants to learn the concept of finance in the early stages of their career.
Remember, spending money without a proper plan can harm your financial condition, so it’s important to save some of it.
It is essential to have a strategy, as it will help you and your future generation live a peaceful life
