As with many things in life, learning to handle finances correctly takes time and practice. Unfortunately, very few people ever get the education and direction that they need and so must learn how to handle finances on their own. The problem of course is that even the smartest of young adults can be quite foolish when it comes to finances, credit and anything to do with money.
It’s for that reason that we put together today’s blog. It’s written for young adults who are just starting out, possibly in their first job and having just graduated college. The tips and advice we’ve collected will help you to keep your losses and financial problems to a minimum while you’re gaining experience (and, no offense, the maturity) at handling money and finances. Enjoy.
One of the biggest risks that all young adults face when it comes to finances is credit cards. The fact is, credit card companies routinely do their best to attract young adults to their cards knowing that their willpower and their financial acumen are, for lack of a better term, wanting. The thing is, a 24-year-old with access to 10, 20 or $30,000 worth of credit is a person that is in grave danger of destroying their credit and their finances for years to come.
While it’s all good and well to build up a credit history, this can easily be done with one or two credit cards that you use to make small purchases and pay off at the end of every single month. And, unless you’ve lucked into a job where you’re earning big money, you’re going to want to keep spending down for a few years while you save for big purchases like a starter home. Even if you are making big bucks (and making them too early can be a problem as well) there is definitely no need to spend everything you make.
One mistake that many young adults make is purchasing expensive new cars when they lend their first job after college. Even worse are those who have low-paying jobs and purchase a new car. Fact is, a new, an expensive car simply means that you’re going to be working a lot more hours in order to pay it off. Those are hours that you could spend doing many other things if you purchased a reasonably priced (or used) car and pocketed the extra money. Until you’re really doing well you be best buying a smaller, economy car and saving your money.
Another mistake is that very few young people track their finances in any way, shape or form. The thing is, many young people make a sizable amount of money and yet are always ‘broke’. The reason is simple; even though they might earn decent money they spend it without knowing where a single dime is actually going. The fact is, if you don’t know whether you make more money each month than you spend (or vice versa) you’re heading for a financial waterfall and you don’t know it yet.
Using a budget to track how much money is actually coming into your hands and how much is going out is absolutely vital to a strong, healthy financial life. It’s the only way to know if you’re spending beyond your means, to know if you can actually afford something or not and to know where your money is going so that, if necessary, you can cut down on things that aren’t important.
As a young adult it’s also vital that you keep your eyes open for any opportunities that arise that, while maybe appearing to be unglamorous, may lead to financial success with a little bit of determination, hard work and time. For example, you may catch wind of a startup company looking for someone that specializes in what you do. While they don’t have a huge budget, a beautiful office and a 401(k) plan (yet), if their business plan is solid and they have the financial backing, it may be an excellent opportunity. Sure, those first few years might be a little trying but, in the end, it may be well worth it.
One last tip for today is simply this; you really don’t need a lot of stuff to be happy. Many young adults get caught up in trends that can turn out to be quite expensive. Men lean towards cars and sports while women towards clothing and jewelry but, in most cases, no matter what it is that you buy it won’t bring you true happiness. We’re not saying that you should never purchase anything and, if you have the means and you work hard, you deserve to have some fun. On the other hand, if you have a super sports car but can’t afford to buy food, your financial priorities might be a little bit skewed.
We were all young once and we know that it can sometimes be difficult but, if you follow the tips and advice above, you should make it out of your 20s without damaging your finances to awfully and make it to your 30s without a huge amount of debt sitting on your shoulders. Good luck, and make sure to come back and catch up on some other excellent financial reading here on our site.