Practical Money Management Skills for Young Adults: A Guide to Financial Success

Entering adulthood comes with freedom and new responsibilities, especially when it comes to managing your finances. For recent college grads and young professionals, learning how to handle money effectively is crucial for building a stable financial future. This guide will provide you with practical tips for responsibly managing money, building credit, and growing wealth so you can achieve your financial goals.

The Importance of Managing Money in Early Adulthood

Making financial missteps at a young age can impact future opportunities. From maxing out credit cards to entering undesirable debt obligations, it's important to develop financial skills that'll help you avoid costly mistakes later on. 

Here are the top 4 reasons why responsible money management is important for your future.

1. Avoids the Debt Trap: Overspending can cause large amounts of debt, higher monthly payments, and increased credit card balances resulting in financial distress.
2. Builds Credit: Good credit is essential for many aspects of life including job opportunities, renting an apartment, buying a car, or securing a loan or credit card.
3. Reach Your Goals: Whether your goal is to save money to invest, take a vacation, or buy a car or home, developing responsible financial habits now creates the blueprint for leading a prosperous life. 
4. Reduces Financial Strains: Developing controlled spending and saving habits gives you a head start in preparing for life’s unexpected challenges. The responsible money decisions you make today can significantly reduce your financial worries and help you avoid costly mistakes in the future. 

Practical Tips for Managing Money - An Easy How To

Adulthood often means facing “adult” expenses for the first time. Paying rent, utilities, and insurance can be overwhelming if you're not prepared or are unsure what to do. By adding a few habits into your daily routine, you'll be giving your dollars and future the best care. 

1. Get into the Rhythm of Budgeting

Creating a budget is the foundation for building responsible money habits. By tracking dollars in and dollars out, you get to take control of your financial health and future. 

Here's how to get started: 

• Categorize Expenses: Divvy up expenses into categories such as rent, utilities, groceries, car payment, and savings. This helps you visualize and organize where every dollar is going. Download our FREE copy of ‘3 Practical Budget Templates’ to find a budgeting style that best fits your needs.
• Set Limits: Based on your income, set spending limits for each expense category and stick to it. A general rule of thumb: Designate 50% of your income to needs, 30% to wants (nonessentials) and 20% to savings and debt payments. People have also found success in allocating 50% to needs, 30% to savings and debts, and the remaining 20% to wants.
• Review and Adjust: Track all of your expenses for a month to see how much money you're spending and on what. Doing this will uncover areas in which you can reduce spending or make adjustments to set more money aside. 

Bonus Tip: Put away a set amount of money for expenses each time you get paid. This ensures you'll have enough funds to cover your bills in full when they come due. 

Budgeting and managing your money has never been easier!

2. Invest in a Savings Habit

Saving money is crucial for achieving your goals and reaching financial security. Getting into the habit of saving will help you prioritize where your hard-earned money goes and will make you think twice before spending unnecessarily.

Here are some ways you can start investing in a savings habit today:

• Pay Yourself First: Treat savings as a non-negotiable expense. Aim to save at least 20% of your income.
• Emergency Fund: Build an emergency fund with 3-6 months’ worth of living expenses to cover unexpected costs. Consider depositing money into a high-yield savings account, like a Money Market Account, to help your money grow faster.
• Maximize FREE Money: If you’re company offers a 401k match, be sure to take advantage of this to give your retirement savings a boost.
• Stop Unnecessary Expenses: Identify areas where you can cut back, such as eating out less often or buying less expensive items.

Bonus Tip: Automate savings through payroll deductions. You can even set up automatic transfers into a high-yield savings like a Money Market Account each time you get paid.

3. Build and Preserve Good Credit

Having good credit is essential for many financial and life milestones such as landing a job, renting an apartment, or getting a loan or credit card. However, if you’re not careful in how you use and preserve your credit, it can damage future financial opportunities.

 Here’s how to responsibly build and preserve your credit:

• Use Credit Cards Wisely: Use credit cards sparingly and pay off balances in full each month. This will help you avoid paying interest and fees while developing discipline in your reliance on a credit card.
• Pay Bills on Time: Timely payment of bills, including rent and utilities, positively impacts your credit score. Missing or making late payments can hurt your credit and future borrowing opportunities. 
• Keep Balances Low: Maintain a low balance on credit cards relative to your credit limit. A good rule of thumb: Stay within a 30% utilization ratio – meaning don't exceed 30% of your total available credit. 
• Monitor Your Credit Report: Check your credit report annually for errors and work with the agency to make necessary corrections. Inaccurate information can affect future borrowing, job opportunities, and more. 

Bonus Tip: Using your low-rate Peach State Visa Credit Card to pay for gas or groceries is an easy way to practice responsible credit use. 

4. Managing Bills, Rent, and Other "Adult" Expenses

Paying bills, rent, and other payments on-time will help you from incurring additional fees, increase your credit, and prevent financial stress. 

Here’s how to manage bills, rent, and payments responsibly:

• Set Up Automatic Payments: Set up automatic bill payments to avoid missing payments and late fees.
• Negotiate Rates: Don’t hesitate to negotiate lower rates for services like insurance and internet.
• Share Expenses: If possible, consider sharing an apartment with roommates to split the cost of rent and utilities.
  
  

5. Become a Lifelong Learner

Unfortunately, there isn’t a curriculum designed for ‘adult finances and expenses’ in school. Most adults learn through life experiences and asking trusted professionals. That’s why it’s important to find resources and continuously educate yourself on personal finance so you can make better, smarter, and more informed financial decisions.

How to become a lifelong learner in personal finance:

• Read Books and Articles: Invest time in reading personal finance books and articles to expand your knowledge. 
• Listen to Podcasts: There are some great podcasts by reputable professionals available. Be careful to not fall victim of latest fads and false information on social media. Always do your research.
• Seek Advice: Don’t hesitate to seek advice from financial professionals or more experienced individuals that you trust.
• Use Available Resources: As a Peach State member, you also have access to FREE financial resources offered through BALANCE to help you during your financial journey.

Developing practical money management skills is essential for young adults navigating the responsibilities of adulthood. Creating a budget, saving money, building credit, and managing bills efficiently will give you peace of mind knowing your dollars are getting the best care so you can achieve your future goals.

Remember, the habits you form now will set the foundation for your financial success in the years to come. Embrace these tips and take control of your finances. Start today and pave the way for a financially secure tomorrow. Your future self will thank you!