Unfortunately, we don’t have a class that teaches us how to manage finances while we’re going to high school. Therefore, many young adults leave their school clueless about how to manage their money. Hopefully, future generations will have at least some sort of education in this field.
Until then, it could be very useful to know a few tips and tricks regarding managing money to help you have the best financial life possible. In addition, if you’re a young individual, learning these tips will open your doors to growing investments.
Control Future Finances
It is always recommended to get educated on personal finances rather than rely on advice from other people. Yes, your grandma Betty really wants you to own a house, but if you’re doing so by taking an adjustable-rate mortgage, maybe that’s not the best thing you can do for yourself. Mismanaging money is something that happens to us even when we don’t notice it.
Arm yourself with knowledge and trust your guts. Additionally, it might be a good thing to reconsider how you’re spending your weekends and whether you’re blowing tons of money with your friends every time you go out.
Be Sure Where you Put your Money
The number one tip to managing money is to make sure that you earn more than you spend. Seems very simple, right? Well, most people have a really hard time getting a grasp of this and would end up spending more than they have, somehow. This is why you need to introduce budgeting in your life.
Once you calculate how much money you’re spending on seemingly low-cost things, it actually adds up very quickly. Making manageable, yet small changes in your daily expenses can have a huge impact on your financial situation.
Emergency Funds
No matter how low your salary is, or how much you owe in credit card debt or student loans, you always need to find at least some amount of money in your emergency fund. Sit down, consider your income, your inevitable expenses, and then calculate how much money you can put aside.
It doesn’t have to be a lot of money, but make sure there is at least some. Doing this will help you sleep better at night, but would also eventually lead to the habit of saving money. Sooner than you expect, you will have enough for a vacation, gift, or any unexpected expense.
Start Understanding Taxes
Even before you get your first paycheck, it is very useful to know how income taxes work. You need to know how to calculate whether the salary the company gives you is enough for your expenses after you deduct the taxes. Starting salary may sometimes seem desirable, but it could be something completely different after taxes.
Fortunately, calculating your taxes is fairly easy today, thanks to plenty of online tools and apps you can use. Take into consideration your country, city, state to get the most accurate results.
Retirement Savings
Planning for retirement is something all of us need to go through. Doing it sooner than later is always better. You want to be prepared for your retirement and save yourself a headache once you’re already old and experienced. Using that time to travel and spending time with your loved ones is always better than averaging positive returns.
If you’re someone who will go with a company-sponsored retirement plan, you can sleep well. These are particularly good because you’re able to put in pretax dollars, meaning you will be getting free money most likely. Trip to financial health is a long one, and having an employer-sponsored retirement plan is a huge relief.
Start saving for your retirement in your twenties and you will have almost triple the amount that someone who starts saving in their thirties. If you’re lucky enough, you will spend a third of your life in retirement, so don’t just overlook it.
Protect Your Earnings
Money is a commodity, and as such, it can easily vanish. There are numerous things that could impact your savings and earnings, and it is generally recommended just to take some precautionary steps in order to avoid negative outcomes.
First, if you don’t own a home and you’re renting, it is generally recommended to get renter’s insurance as soon as possible. Fire and burglary are real, unexpected, and unfortunate events that can lead to bankruptcy very quickly. Protect your place from such events and read the policies carefully.
In addition, you want to protect your greatest asset – the ability to earn money. Therefore, you want to get disability insurance and make sure you have a steady income if you’re unable to work due to injury, illness, or handicap.
Financial planners can also be very useful if you want to get better at managing your money. Usually, they will only charge a fee to give you unbiased advice on what should be in your best interest.
