Financial And Money Management Skills For Every Young Adult
January 22, 2024
Did you know that for every three people in the world, only one is considered to be financially literate and possess money management skills?
The numbers are even more shocking when it comes to young adults. It is not uncommon among most young adults to spend more than they make or exhaust their money just days after being paid and literally having to ‘survive’ until their next paycheck. It is a worrying trend but thankfully reversible through financial literacy
Financial literacy is an essential skill young adults should be encouraged to possess as it’s the surest path to financial independence. Failure to acquire financial literacy skills early in life can spell trouble in the future as far as money management is concerned. Financially literate individuals can avoid incurring high loan charges, running up big debts, outliving their life savings, and even avoid stress-related illness caused by financial strain.
As a young adult it is essential you acquire and apply money management skills to help you towards financial independence, something that has been elusive to many people. To get you started, this article shares some of the most important skills you should work on as a young adult.
Setting your financial goals
As a starting point, you have to come up with your financial goals. These should be grouped into short-term and long-term. The short-term goals act as your performance indicators to gauge whether you are still on the right track. The goals should be realistic, specific, and time-bound. Without having financial goals you are most likely to lack the motivation for saving and investing and will be prone to spending your money recklessly.
Create a plan for the future
After coming up with your goals, the next step should be creating a plan to achieve them. Be honest with yourself while creating this plan and start with things that are of high priority as you move to those you attach less priority to. Financial planning can be a challenge at this stage in life since it’s a new concept to you but breaking the plan into chunks of say three years can simplify the process.
Budget for your money
This is an essential skill you have to learn early in life because as you grow up it is going to be vital with more financial responsibilities bound to come your way. A budget will help you track your expenditure and will help you allocate your finances according to the areas of priority helping you avoid unhealthy spending.
An important area you can choose to prioritize in budgeting is your transportation. Do you need to buy a car or can use a rental car on a needs basis? Buying a car comes with extra expenses like maintenance costs plus monthly payment installments.
Renting one will be the better option for you as it gives you the option of choosing the right type of rental car for every situation. If you are running a catering startup for example in Augusta, Georgia you can rent a budget van from the several van rentals Augusta GA whenever you have an event which will be a cheap option instead of purchasing one.
Have an emergency fund
Before becoming an adult your parents were in charge of all your expenses including any emergencies. As a young adult, you may have just moved out of your parent’s house or planning to and now will be in charge of all aspects of your life including any emergencies that may come up. This makes having an emergency fund vital because you never know when you will need it. It acts as a safety net and will give you a soft landing when something unexpected happens.
Related: Online Money Management Tips For Students: Leveraging Finance Apps
Safeguard your savings
Make your savings difficult to access. Only your emergency fund should be easy to access. By becoming hard to access you are likely not to misuse the funds through impulse spending. To ensure you also follow a strict savings plan you can place a standing order on your account to go to your savings accounts every month to avoid the temptation of diverting the money to other expenses.
Build your credit history
To have a good credit history you have to start early. This will give you a good credit score that gives you a strong financial standing which may come in handy when you badly need it later in life. If you have credit cards, ensure you pay them on time and avoid taking unnecessary loans.
Protect yourself
On your financial plan, you should include investing in a life insurance cover. As a young adult, the cover will be cheaper compared to when you advance in age. Having one will ensure your future family is protected in case of an unfortunate eventuality. Sample several life insurance covers from different providers and settle on the one you find suitable for you.
Conclusion
The earlier you master money management skills the better it is for you. As a young adult with lots of years ahead to live, these skills will come in handy to help you live a comfortable life devoid of financial strain. This is easier said than done and will require lots of discipline and consistency. It is nevertheless achievable by applying money management best practices some of which have been discussed in this article. Make the decision and take charge of your financial future.
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