January 20, 2018

5 Money Rules Every Young Adult Should Live By

Before you moved out of your parents’ house, managing money probably wasn’t a priority; after all, your parents made sure you were taken care of. Now, it’s up to you to manage the funds from your paycheck to meet your basic needs. If not, you could find yourself hungry or buried in a mountain debt.

Here are some financial habits you should grasp sooner than later to achieve financial freedom:

1. Begin with the end in mind

If you want to move into a more spacious apartment or trade in that old clunker for a more stylish ride, develop a plan instead of cleaning out your savings account or getting into debt that will cost you more than you initially bargained for. Financially-savvy adults typically don’t make impulse decisions for big-ticket purchases. Instead, they formulate a plan to save money for weeks, months or sometimes years in advance.

5 Money rules - shutterstock_135014876

2. Create a spending plan

A budget is simply a plan to help you live within your means while working toward your financial goals. View it as a roadmap for your funds. However, the income and expenses must be realistic for your spending plan to be effective. For example, if your groceries are around $50 each week, slashing the number in half for the sake of balancing your budget will backfire. Also, don’t forget to over-budget here and there to give yourself a little wiggle room in case an expense comes in slightly higher than expected.

3. Pay yourself first

Life happens, and if you aren’t prepared, your finances will take a hit. That’s why it’s important to establish and continue adding to your emergency fund. Unfortunately, many of us struggle in this area, as CNN Money reports that 76 percent of working Americans are living paycheck-to-paycheck.(2) The only solution is to pay yourself first (i.e. move money from your checking account to savings account) as soon as you get paid.

4. Protect your identity

Identity theft is a threat that only continues to grow. Think you’re invincible? Think again. Guard your personal information like your life depends on it, because it does. Change passwords often, be in-the-know about all account information and always keep your personal documents stored in a safe place. Also, think about signing-up for credit monitoring and identity theft protection to track illegal activity or theft of your personal information.

5. Steer clear of debt

Not all debt is bad, but if you bite off more than you can chew or get behind in payments, it will come back to haunt you in the form of exorbitant interest, fees and drastic dips in your credit score. Until you completely understand how credit card debt works and you have a steady source of income, avoid credit cards entirely.

(Quick note: being debt-free or without debt tools is not an excuse to completely ignore your credit profile. The Federal Trade Commission (FTC) revealed that one in five credit reports contained inaccuracies and goes on to explain that the earlier errors are detected, the better your chances of having the inaccuracies removed).

Things to remember:

  • Need is more important than want
  • Monitor your account activity
  • Read the fine print

Bottom line: if you establish sound financial habits and take care of your money, it will take care of you for many years to come.

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About the Author: CTB Staff (48 Posts)

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