As a young adult, it's important to learn best practices to effectively manage your money and work towards a path of financial independence. This means that you need to be able to take charge of your finances so you'll be able to support yourself and meet all your goals, including a bright financial future.
Financial Conversations: Bridging the Gap
Making smart financial decisions in your 20s starts with having productive discussions with parents or a trusted friend regarding money and financial tips. Their experience with paying bills, getting loans, and building a strong credit history can help you better prepare for your financial journey.
Budgeting Basics - Financial Guidance for Young Adults
Navigating your finances as a young adult can be tricky, but it all starts with a solid budget. In this section, we'll break down the essentials of budgeting – how to track your spending, set achievable goals, and make your money work for you. Ready to take control of your financial future? Let’s get started with these key budgeting basics!
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Know Your Income: This includes any earnings you receive from full-time or part-time work as well as side hustle gigs.
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Know Your Expenses: This includes all your bills, subscriptions, memberships, credit card, and loan payments.
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Understand the Difference Between Wants and Needs: A need is anything required for survival like housing, transportation, food, health, and security. Wants are the things your desire but don't necessarily need in order to survive.
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Track Your Budget Success and Make the Necessary Changes: This will help you manage your income and expenses, and shows you how you're spending your money each month. Tracking what's coming in and going out each month will help you find areas to cut back on spending, increase your savings, and improve your financial security.
- Start Building an Emergency Fund: Adding funds to a Money Market Account or high-interest Savings Account each month will give you a financial safety net in an emergency situation and also earns you a few extra dollars from interest.
Understanding the basics and creating a budget that reflects your income and lifestyle is important. Try one of our ‘3 Practical Budget Templates That Actually Work!’ to help you get started. Setting a budget that includes living within your means and setting aside some money in savings each month is the best way to ensure you reach your long-term goals.
Credit 101: Starting Strong
One of the best financial tips for young adults is that it’s never too early to learn about your credit score and how it affects your financial success. Starting strong and continuing with that pattern is the direct path to financial independence.
Tips for Building Good Credit Habits
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Pay your bills on time
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Keep credit use low (do not exceed 30% of your total available credit)
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Check your credit report frequently and immediately correct any errors
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Limit new credit applications
Managing and Maintaining Good Credit
Managing and maintaining a good credit history is crucial for financial success. Every loan, credit card, and home mortgage will require a good credit score. The better your credit score, the better interest rates, and loan opportunities you’ll have when you need them. Maintaining a good credit score should be a financial goal for everyone, no matter their age but starting in your 20's gives you a positive head start. To learn more best practices for maintaining good credit, check out our 'Simple Steps for Maintaining Good Credit' blog.
Budgeting and managing your money has never been easier!
Investing in Your Future: Early Retirement Planning
It’s never too early to set financial goals that includes saving for retirement. Investing in your retirement when you're in your 20s might seem impossible when your budget is already tight, but saving even a little money right now will give it more time to grow! In fact, as soon as you start earning money of your own, you should begin setting long and short-term financial savings goals to keep you motivated and to keep your saving on track.
Resources to Help with Financial Independence
A secure future is in store for young adults who take charge of their financial independence by learning how to properly navigate their finances. Learning about the importance of financial responsibility now will help ensure positive money habits throughout your life.
- Read Books and Articles: Invest time in reading personal finance books and blog articles to expand your knowledge.
- Listen to Podcasts: There are some great podcasts on various financial topics by reputable professionals available. But be careful to not fall victim of the latest fads and false information circulating on social media. Always do your research.
- Seek Advice: Don’t hesitate to seek advice from financial professionals or experienced family members or people you trust.
- Use Available Resources: As a Peach State member, you also have access to FREE financial resources through BALANCE to help you along your financial journey.
Creating smart money habits and learning to manage your day-to-day finances in your 20s will help make your path to financial independence an easier one. From budgeting to building a good credit history and even saving for retirement – now is the time to embrace financial independence!
