Are you a young adult who could use some essential advice about money management? If so, you’re not alone because the vast majority of older teens and adults in their early twenties can use a healthy dose of financial guidance.
Maybe you’ve already taken formal classes that teach how to create a personal budget, save for the future, or balance a bank account with a spreadsheet.
Those are all worthwhile endeavors and can come in handy as you grow in your career and financial knowledge.
But don’t ignore the value of reviewing a few useful hacks that can transform the way you look at, acquire, and spend the money you have.
Some young people have the mistaken impression that learning to handle finances is a waste of time and only for high income earners. On the contrary, knowing how to manage finances is all the more important if you’re just starting out and finding it difficult to get from month to month on what you currently earn.
Here are some money hacks for young adults to know about personal monetary matters.
Save Regularly and Automatically
No matter how much you earn, make a point to set aside a fixed percentage of all your income for savings.
Set up an account with a local bank or credit union and arrange for a payroll savings type plan so that you don’t have to think about or see the money before it goes into savings. Don’t be concerned about the percentage.
In fact, choose 1% as a starting point. The entire goal of this exercise is to learn how to save regularly. At this point, the amount doesn’t matter.
Learn to Borrow Responsibly
Be careful using high-interest credit cards in place of more responsible kinds of borrowing. There are several very good reasons to borrow money, but a smart way to acquire funds for a special event or unexpected expense is to take out a personal loan.
Not only can a loan help build up your credit score, but it can also fill in the gap when you need cash to pay for a surprise medical bill, a specialized training course to land a better job, or a major purchase.
More importantly, taking out a personal loan can go a long way toward teaching a person how to view money in a more responsible, logical way.
Make a Detailed Budget
If you’ve never had a budgeting class, check out some of the free offerings online and get busy writing a basic monthly inflow-outflow list for all your income.
It’s essential to include all regular income and expenses in a proper monthly budget. Do it on paper first and then transfer everything to a digital spreadsheet.
Budgets are a good way to keep track of what you spend and earn, and they can serve as an incentive to save.
Additionally, a well-constructed budget can give you insights into how, when, and why you spend money.
Often, people are surprised at the expense categories and the amounts of money they devote to things like eating out, convenience store purchases and bar tabs.
Learn the ABW Principle
ABW is an old-fashioned rule that still makes sense. The letters stand for always be working.
Gaps in employment can come back to haunt you later in life, particularly when they’re longer than one or two months. The ABW guideline is simple to implement.
If you ever lose a job, for whatever reason, get a fill-in position immediately. In addition to making your resume look better, the principle will keep you from going broke.
Establish Credit
Strategic borrowing is an excellent way to cover unexpected expenses. It’s also an effective tool for establishing or improving credit scores.
Another quick and efficient way to boost scores is to apply for a secured credit card. Use a low-balance one with low fees, and remember to pay it off in full at the end of each month.
Expect to wait about six months before seeing an effect on your scores.
Take a Defensive Driving Course
Sign up for a no-cost defensive driving class. Most communities offer programs through local social service agencies for drivers of all ages.
Besides making you safer on the road, the classes can lower insurance premiums, provided you contact the insurance agency and let them know you completed the training.
Check with the carrier to see how much of a discount, if any, they offer for policyholders who take defensive driving classes.
Avoid Money Eating Habits
The most powerful financial hacks can save you money immediately.
Make an honest assessment of your spending habits and consider dropping the ones that drain the monthly budget.
If you smoke, join a free class to learn how to quit. Another money drain is the frequent use of alcohol. Put aside all the health-related warnings you hear about drinking and smoking.
Focus on the expense side of the question, and do the math. How much would you save per month if you stopped smoking and cut down on drinking, particularly in bars?
Most are shocked to discover the number is much larger than they expected.
Buy Life Insurance
Anyone under the age of 30 finds it easy to dismiss the importance of life insurance.
However, the vast majority of working adults eventually purchase a policy, but many wait too long and end up paying way too much for the coverage.
Someone in their late teens or early twenties can get access to incredibly low rates on standard life policies.
Term life insurance can cost young adults just a few dollars per month for a significant amount of coverage.
Set Up a Retirement Fund
Besides making regular contributions to a savings account, set up an IRA and start funding it with whatever you can afford.
There are annual limits, so you won’t be able to funnel more than $6,000 per year into the account.
Assuming you’re under age 25, any amount you add to an IRA can have a major impact on the long-term savings that will accumulate over more than four decades.
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