Today’s young adults are flying the nest and entering the real world with no understanding of how to manage their money or make wise financial decisions.
And if you’re in this increasingly large group of people, there’s one thing you need to hear: It’s not your fault. But just because it’s not your fault, doesn’t mean you can sit back and ignore the issue. You need to take control.
6 Money Tips All Young Adults Need To Hear
Financial literacy is at an all-time low. The number of young Americans who can correctly answer basic questions about financial terminology and concepts is lower than it’s ever been.
If you’re in your twenties and you don’t know how to manage money, you’re the product of a failed system. But playing the victim won’t do you much good. It’s time to pick yourself up and backfill those knowledge gaps with sound financial information.
Here are a few common sense tips you can use to improve the decisions you make with money:
1. Create A Budget
The very first step is to create a budget. While the “B” word seems boring and tedious, it’s actually one of the most freeing parts of personal finance.
By creating a spending plan, you’re able to direct your money precisely where it should go. It also forces you to be organized and compels you to spend your money in an intelligent manner.
If you’re married, it’s highly recommended that you and your spouse share one bank account and work out of the same budget.
Not only is there power in combining resources, but it also helps you stay on the same page with your communication and emotions.
2. Be Mindful Of Your Friend Group
There’s research that shows you become the average of the people you spend the most time with. This can have a positive or negative effect on your relationships.
For example, if all of your friends are free and careless with their finances – spending hundreds of dollars a month on bar tabs – you’re probably going to do the same. But if all of your friends are budgeting and investing, you’ll be compelled to follow suit.
We’re not telling you to ditch your friends, but do be aware of how the personal finance habits of your peers are rubbing off on you.
3. Take Advantage Of Employer Match
Investing is something that you need to be doing from a very young age. In fact, time is your greatest asset in wealth building. If you start early in your career, you can build a seven-figure net worth by investing nothing more than a few hundred dollars a month. (If you start much later, you’ll be forced to contribute a much larger percentage of your income.)
If your employer offers something known as an “employer match,” take full advantage of it. This is basically free money. If nothing else, invest up to the maximum match. This “free” money could turn into tens of thousands of dollars by the time retirement rolls around.
4. Spend Less Than You Make
This piece of advice is a little bit of a no-brainer, but it’s something that many young Americans struggle with.
Because we live in a debt-friendly culture, there’s a misconception that you can (and should) leverage every bit of financing you can – including credit cards.
However, this is a terrible idea. If you learn nothing else from this article, hear us out on this one: spend less than you make. The rest of your life will be much better for it.
5. Be A Smarter Shopper
Always shop around and get multiple quotes any time you purchase a service. You’ll be shocked, for example, by how much you can save by simply getting three auto insurance quotes.
If you make a habit out of doing this for everything – including car insurance, home repairs, and even tax preparation – you’ll bring in some major savings over the long run.
6. Avoid Bad Debt
The final suggestion is simple in theory yet difficult in practice. While we all have an intrinsic understanding that bad debt – like credit cards and expensive cars – is bad for our long-term financial health, it’s hard to overcome the appeal of instant gratification.
However, if you can learn to do this, your 10-year track record will be far superior to those who give into every fleeting desire over the short-term.
Get Your Financial Life On Track
The bad news is that you’ve done a disservice. Parents and teachers never gave you the tools you need to make wise financial decisions.
The good news is that it’s never too late to learn. And by committing yourself to sound financial principles such as the ones discussed above, you can turn things around and take strides toward building wealth.