Starting life as a young adult is one of the biggest transitions you’ll make. You’re faced with obligations you haven’t had before, yet it’s a time that’s also full of opportunities. From launching a career to meeting people and making memories, there are so many new experiences. Along with the adventure, one of the best things you can do now is get a handle on your financial outlook. Focusing on finances puts your goals within reach, so you can enjoy life now while knowing you also have security for the future.
Keep reading for the best financial strategies as you head out on your own for the first time, and be sure to check out The Teen Trillionaire for more great financial tips and advice.
A surprising number of adults (at every age) don’t have a good grasp of basic budgeting. Budgeting is the foundation for healthy finances, and it’s easy to do using a free spreadsheet template or a mobile budgeting app. Whichever route you take, budgeting is the best way to ensure you live within your means and avoid debt.
Along with budgeting, understanding your credit score is another basic financial necessity. According to Investopedia, knowing how you can improve your credit can make a huge impact on financial goals, such as buying a home. This is because your credit score often determines whether you’re approved for a loan, and a good credit score can even help you get a lower interest rate.
Planning for the Unexpected
To ensure you stay on solid ground, you also want to think about life’s “what-ifs.” These are situations you don’t see coming but can cost you dearly if you aren’t prepared. You may think you’re too young for life insurance, but it’s never too early to look at your responsibilities and find a policy that fits your needs.
For many young people, a 20-year term policy is ideal. Life insurance provides security for family members if something happened to you, by helping to cover major expenses including medical bills, funeral expenses, and loss of income. If you have children, debt, or a 20-year mortgage, a 20-year term policy would ensure these financial responsibilities would be covered. Plus, a 20-year policy costs less than other types of policies, so it’s perfect for someone on a tight budget.
Health insurance is another financial basic that young adults often neglect. After all, you’re young and healthy, right? The reality is that anyone can get sick or injured, and hospital bills can do some serious damage to your finances. If you’re age 25 or younger, you may be able to get health insurance through a parent’s plan. Regardless of your age, everyone should learn about how health insurance works and all the complexities involved.
Setting Financial Goals
Along with making sure these basics are covered, you also want to start setting financial goals. First, think about where you want to be in the near future. Do you plan on getting married? Starting a family? Buying a home or paying off a car loan? If you have student loan debt, you may want to consider refinancing these loans. Long-term goals like saving for retirement may seem really far off, but that doesn’t mean you should overlook them.
The first thing you need to keep all of these goals in sight is savings. Search online for a high yield savings account, and set up an automatic draft so that you’re saving without even thinking about it. And if your employer offers a 401(k) plan and will match your contributions, you should take advantage of this opportunity to start saving for retirement. Along with saving, don’t wait until you’re older to start investing. Forbes recommends starting small and then increasing the amount you invest as you get older.
Even when you start small, compound interest is in your favor when you start investing early. This is just one example of how it’s smart to focus on finances now rather than waiting. Don’t make the mistake of thinking you’ll start saving and investing once you have more money. Putting your finances in order now is how you protect what you have and make your money grow for the future.
Want more ways to secure financial independence? Get in touch with The Teen Trillionaire for free financial consulting services.
Written by Amy Collett