Money is one of the biggest stressors that people face, no matter what life stage you’re in. But it can be especially nerve-racking as young adults to face the world of finances when it comes to budgeting, debt, and saving for the future. To get you started, here are 3 ways to set your finances up for success as a young adult.
1. Create A Budget (and stick to it!)
The word “budget” might make you squirm—a lot of times budgeting is associated with penny pinching, lack of freedom, and zero fun. But in reality, having a good budget can bring just the opposite. When you know where your money is going every month, you have the freedom to save where you want to save and spend where you want to spend. That means if you want to buy a new phone, you can make a budget line for that. If you want to take a vacation this year, budget to save the exact amount needed each month leading up to when you want to make it happen. Budgeting really just means having a plan.
If you need somewhere to start, we recommend the zero-based budgeting system through Dave Ramsey. You can also use budgeting apps, like EveryDollar or Mint, that you can connect to your bank account so you always know the status of your budget.
2. If You Have Debt—Tackle It
From school debt, to car debt, to credit card debt, our society has normalized the monthly payment to pay back the loans you took out in your lifetime. But the truth about debt is that even if you’re just making minimum payments, it’s holding you back.
No matter how much debt you may have, make a decision to go after it. Now that you have a budget, create a line specifically for debt management—and don’t just plan to pay the minimum every month. Once you’ve established an emergency savings fund (we recommend saving at least $1,000 for emergencies), put the rest of your extra income towards debt. That’s right—the rest of it. Do whatever you can to eliminate your debt as quickly as possible.
Being debt free as a young adult will free you up to make wise financial decisions in the future—from buying a house to raising a family, investing to retiring, you’ll have a clean financial slate to pursue your future dreams.
3. Save For Your Future Self
The best financial gift you can give your future self is to save now! After you’ve established a budget that works for you and eliminated any debt, your third step is to start saving. An easy way to do this is to take all the money you were throwing at your debt, and throw it into your savings instead. Or, even more if you’re able!
Once you’ve saved 3-6 months’ worth of income, start thinking about investing in your retirement, paying off your mortgage if you have one, or even saving for future expenses, like your kids’ college funds. The more you do now, the less you’ll have to worry about later, and the more relaxed you can be when it comes to money. Your future self will definitely thank you!
Money doesn’t have to be a stress point for you. If you’re willing to take big steps towards setting up your finances for success, it can be just another part of life (and a pretty fun one, actually!). If you’re interested in learning more about how to manage your money instead of letting it manage you, check out Financial Peace University—a 9-week program that will help you learn how to eliminate debt, build wealth, and give like never before.