by Ed Carter
When young people leave mom and dad's and strike out on their own for the first time, they are confronted with a newfound sense of freedom. While it can be exhilarating, this also comes with great responsibilities. Money management for young adults can be especially daunting. The financial steps kids take now can seriously impact their financial stability in the future, however. The Independent cites surveys showing that many young people under the age of 30 are ruining their credit rating without even realizing it, for example.
If you are a newly independent young person, check out this guide presented below by Dignity of Children Inc. to help you start off on the right foot.
Learn how to budget.
Create a monthly budget that tracks all your incoming and outgoing funds. It should include basic costs such as housing and food as well, as “extras” like clothing or nights out. Kinda Frugal points out that the point of creating a budget is to make sure you aren’t living beyond your means. Ideally, you will have enough to cover your costs every month—and to set aside some money for savings. Keep in mind that budget creation isn't a one-time job. You will likely have to adjust, for instance because of inflation, a spike in gas prices or a financial setback like job loss. Be prepared to adapt.
One way to keep track of your spending habits is to scan all of your receipts into your computer as PDFs so you can have easy access to what you’re spending and where. You can even keep track of these files by year; use free apps and programs online to easily combine PDFs into one file.
Use an app to track spending.
The easiest way to make sure you don’t exceed your budget (or to figure out why you keep blowing it) is to use an app. Since you have your phone on you at all times, it’s easy to note whenever you make a purchase, even if you are on the go. For simple personal financial tracking, Wally is ideal. It tracks expenses and provides useful feedback on how to cut your spending. Another popular option is Mint, which is free and can even be linked to a wide number of banks and lenders.
Tracking spending is particularly important for those who have a side gig in their spare time. Keeping personal and business expenses separate is smart, and for young people it’s a great way to get hands-on experience organizing finances from an occupational perspective.
Shop around for your car insurance.
As a young person, car insurance is likely going to be one of your big-ticket expenses. Drivers under the age of 30 face higher rates because they are statistically more likely to get into accidents than 30- to 69-year-old drivers. Other factors that determine your premiums include gender and location. You’ll have other driving expenses (e.g., car payments, gas), so don’t pay more than you need to for car insurance. Ask different providers in your area for quotes to find the one that is best for you.
Start an emergency savings fund.
Life is full of unexpected surprises, and some of them can be costly. Maybe your phone is on the fritz or your laptop gives out in the middle of the semester. Whatever the case may be, when emergencies like this come up, you want to have an emergency fund to dip into. This means you won’t have to turn to a credit card and risk not being able to pay it back on time, which will lower your credit score. An automated savings plan is ideal: Simply specify how much you want to set aside each month and it’s automatically moved to your savings account before you can touch it.
Follow these guidelines now so you will be setting yourself up for a more financially secure future down the line. This can make a big difference in whether you attain your future goals or not. For example, if you end up with a bad credit rating because you were late on car payments, you may have trouble getting approved for a mortgage to buy your dream house one day (or get stuck with a higher interest rate). Get smart about your money now and you will be thanking yourself in the years to come.
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