Despite money being central to adult life, many young people lack the knowledge and skills to manage their finances. Sadly, only 24% of millennials show basic financial literacy, the National Endowment for Financial Education reports. Proper financial planning and management is one of the most important life skills you can have — and it doesn’t have to be scary! Rather than struggling to learn everything at once, start with the basics: budgeting, saving, and building credit. You’ll be empowered to continue taking charge of your money and maintaining financial security into the future.
Learn to budget
Become aware of exactly how much you’re spending each month. Record each and every one of your expenses — do they total more or less than your income? How many are essential versus frivolous? You’ll see ways you can cut back and save money (making coffee at home rather than paying for expensive lattes, for example). Setting a reasonable budget and living somewhat frugally now will save you megabucks in the long-run. Without unnecessary spending, you’ll afford your dream vacation or first home down-payment much earlier!
Use credit wisely
The instant gratification gained from putting things on a credit card can be addictive. But working to save enough money before buying what you need is an important life skill. If you’re going to use credit cards, be responsible. Always pay your bill in full and on-time. You’ll begin building a strong credit history, which will benefit you for life. Aside from being convenient, credit cards also provide advantages in terms of points and rewards. If you love to travel, consider saving money and reaping rewards with a travel rewards credit card.
It’s important to have an emergency savings fund for out-of-the-blue medical, household, or car-repair bills. No matter how many debts (like student loans or credit cards) or bills you have, always contribute to a savings account each month — as much or as little as you can. If you keep this habit up, you’ll soon have enough money for more than just emergency expenses. It’s also vital you put your savings into a high-interest online savings account to maximize your returns.
It’s never too late to start taking your financial life seriously. These practical tips will help you adopt a more responsible approach towards money. Making small changes to how you handle your finances now will leave you in a more secure and prosperous place later in life.