Unfortunately, most high schools and colleges do not require personal finance. Because of a lack of basic financial education, many young adults have no idea how to manage their money, apply for credit, or get or stay out of debt.
To get you started, let's look at eight of the most important financial concepts to understand. These financial advice for young adults are intended to assist you in living your best financial life.
My other thinking Maybe you know or you don't know but this article is meant to help you revise your financial behavior
1Develop self-control
Some of us are lucky to have been taught by our parents this skill. If not, remember that the sooner you learn the fine art of deferring gratification, the easier it will be to keep your finances in order.
Although you can easily purchase an item on credit the moment you want it, it is better to wait until you have saved up enough money. Are you willing to pay interest on a pair of jeans or a box of cereal?
If you have a habit of putting all of your purchases on credit cards, or lets say buying without plans,regardless of whether you are able to pay your bill in full at the end of the month, you may be in for the wrong side of finance because you will be paying for those items in interest.
2Take charge of your financial future
If you don't learn to manage your own money, others will (mis)manage it for you. Some of these people, like unscrupulous commission-based financial planners, may have bad intentions.
Others may be well-meaning but inexperienced, such as Grandma Betty, who wants you to buy a house even though you can only afford a risky adjustable-rate mortgage. Instead of relying on others for advice, take charge by reading a few basic personal finance books.
Once you've armed yourself with personal finance knowledge, don't let anyone catch you off guard—whether it's a significant other who slowly drains your bank account or friends who want you to go out and spend a fortune with them.
3Understand where your money is going
After reading a few personal finance books, you'll realize how critical it is to ensure that your expenses do not exceed your income. Budgeting is the best way to accomplish this.
When you see how much your morning coffee adds up over the course of a month, you'll realize that making small, manageable changes in your daily expenses can have the same impact on your financial situation as getting a raise.
Furthermore, keeping your recurring monthly expenses as low as possible will save you a lot of money over time. If you don't spend your money on a fancy apartment right now, you might be able to afford a nice condo or a house before you retire.
4Create an emergency fund
"Pay yourself first," as the adage goes in personal finance. No matter how much you owe in student loans or credit card debt, and no matter how low your salary appears, it's a good idea to set aside some money—any amount—every month for an emergency fund.
Having money set aside for emergencies can keep you out of financial trouble and help you sleep better at night. Also, if you develop the habit of saving money and treating it as a non-negotiable monthly "expense," you'll soon have more than just emergency funds saved up: you'll have money for retirement, vacation, and even a down payment on a home.
Put this money in a high-interest online savings account, a certificate of deposit, or a money market account rather than under your mattress. Otherwise, inflation will erode the purchasing power of your savings.
5Begin putting money aside for retirement
Just as you went to kindergarten with your parents' hopes of preparing you for success in a world that seemed eons away, you must plan ahead of time for your retirement. Because compound interest works, the sooner you start saving, the less principal you'll have to invest to get to the amount you need to retire, and the sooner you'll be able to call working a "option" rather than a "necessity."
Company-sponsored retirement plans are an especially good option because you can contribute pre-tax dollars, companies will often match a portion of your contribution, which is like getting free money, and contribution limits are generally high (much more than you can contribute to an individual retirement plan).
6Get a handle on taxes
Even before you get your first paycheck, it's critical to understand how income taxes work. When a company offers you a starting salary, you must understand how to calculate whether or not that salary will provide you with enough money after taxes to meet your financial goals and obligations.
Fortunately, there are numerous online calculators, such as PaycheckCity.com, that have taken the guesswork out of calculating your own payroll taxes. These calculators will show you your gross pay, how much is deducted for taxes, and how much is left over, also known as net or take-home pay.
In 2019, a salary of $35,000 in New York will net you around $27,455 after taxes and exemptions, or about $2,290 per month.
Similarly, if you're thinking about switching jobs in search of a raise, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 to $41,000 won't give you an extra $6,000, or $500 per month—it'll only give you an extra $4,195, or around $350 per month (again, the amount will vary depending on your state of residence).
7Take care of your health
If paying monthly health insurance premiums seems impossible, what will you do if you need to go to the emergency room, where even a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't put off applying for health insurance any longer; it's easier than you think to get into a car accident or trip down the stairs.
You can save money by obtaining quotes from various insurance providers in order to find the best rates. Also, by taking daily steps to keep yourself healthy now, such as eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol excessively, and even driving defensively, you'll thank yourself later when you don't have to pay exorbitant medical bills.
8Safeguard your wealth
If you want to ensure that your hard-earned money does not disappear, you must take precautions. If you rent, get renter's insurance to protect your belongings from events such as burglary or fire. Disability income insurance safeguards your most valuable asset—your ability to earn an income—by providing a consistent income if you are unable to work for an extended period of time due to illness or injury.
If you need help managing your money, look for a fee-only financial planner who will give you unbiased advice that is in your best interests rather than a commission-based financial advisor who will make money if you sign up for the investments that his or her company supports.
You'll also want to protect your money from taxes and inflation, which you can do by ensuring that all of your money is earning interest through vehicles such as high-interest savings accounts, money market funds, CDs, stocks, bonds, and mutual funds.
In conclusion
Remember that you don't need any fancy degrees or a special background to become an expert in financial management. If you follow these eight financial rules and financial tips in your daily life, you can be as financially successful as someone with a hard-earned MBA in finance.
