Unless you’ve been living under a rock, you’ve probably heard of super rich athletes that are now “MC Hammer broke”. All the millions they’ve earned during their professional career just went up in smoke, and the lifestyle they’ve enjoyed is now just a memory. If only they knew about proper money management. Unfortunately, personal finance isn’t taught in high school, and the people who know a lot about it studied about it. This is why young adults should stock up on financial tips and tricks, while you’re still young. Lucky you if your parents gave you a lesson or two. If not, you should start learning about them now.
Use Good Planning to Take Advantage of Time
When it comes to personal finance, adopting a long-term perspective is absolutely paramount. By keeping your eyes fixed on the prize, you gain an incredible sense of clarity when it comes to the decisions you make and the plans you lay down today. Ask yourself some hard-hitting questions: When do you envision yourself kicking back and retiring, sipping piña coladas on a tropical beach? Do kids fit into your future dreams? And what about your career? It’s essential to have a realistic view of how it can and will progress over your working years.
Having a well laid plan then leads to where the excitement starts to build. Thinking about these questions early on can be a total game-changer, because it gives you something precious: time. Why is time so crucial, you may ask? When you start thinking about your financial goals from the get-go, you open the doors to —compounding interest. Imagine this scenario: You set your sights on a lofty goal, and you start investing early, harnessing the power of compounding interest. Your money starts growing, not just on the initial amount you invested, but also on the gains that money generates over time. As the years go by, your investments keep growing, and that’s when you witness the real power of compounding interest. In the long term, compound interest is the true “secret sauce” to financial freedom and stability. Get your plan down so you can start taking advantage as early as possible!
Learn to control your Personal Finances
Let’s face it, the dangerous trap of overspending and/or maxing out credit cards is a result of one thing: a lack of discipline and determination to rein in those expenses. The secret lies in mastering the art of self-control. You must cultivate the keen ability to distinguish between allocating funds wisely and embracing the power of frugality. And here’s the kicker – it all starts with a well-crafted budget. A budget will be your guiding light on this journey to financial freedom.
By staying committed to your budget and developing solid self-control, you can foster a harmonious relationship with your finances. Taking a good disciplined approach to how and where you spend your money leads to a good path paved with prosperity and boundless opportunities.
Learn to control your Personal Financial Future
Let’s not ignore the cautionary tale of those once-wealthy athletes turned broke. Many of them met their financial downfall through mismanagement. It’s a harsh reality born out of a lack of financial literacy, leaving them vulnerable to the deceit of dishonest individuals, poor investment decisions, and terrible spending habits. Now, you’re probably not an athlete with a ton of money sitting in your account, but maybe you’re the first person in your family to make a solid middle class income? What if you’re the person in your social group that is fiscally minded and is looking to make solid, wise decisions? If you’re in one of those positions, you know that people are looking at you and watching what you do, and its important for you to set a good example for those around you. The way you can take control and be a great influence is by learning as much about personal finance as you can. Educate yourself. Don’t fall victim to the same pitfalls and mistakes you’ve seen family and friends make. Learn about budgeting, investing, and saving. Understand the principles that will safeguard your hard-earned money and guide you towards prosperity. Take the reins and become the master of your financial domain.
So, don’t waste another moment. Don’t let ignorance be your downfall. Empower yourself with knowledge and arm yourself against financial disaster. It’s time to take charge and forge your path to financial success. The choice is yours.
Keep an eye on your Personal Finance progress
Don’t be the young adult scratching their head, clueless about where their money went. Let’s get real, keeping your expenses in check is non-negotiable, and it all starts with the power of budgeting and expense tracking. Stick to your budget like glue. This is where self-control comes into play. Resist the temptation to splurge on unnecessary purchases and stay focused on your financial goals. Remember, delayed gratification paves the way to long-term success. Keep an eye on recurring subscriptions or bills that hit your account, you might realize there are services you’re paying for that you’re no longer using. Keeping an eye on your money is also great because over time, as you earn, learn, and save more, that balance will go up and it’s really really cool to see. When you start seeing your money increasing, it just makes it that much easier to be diligent with your money.
Another thing to keep track of as you progress is your net worth. Your net worth is basically – All of your assets (i.e. Cash, investments, or the market value of a home) – all of your liabilities (i.e. student loans, car loans, mortgage etc.) I personally use Empower to do this tracking for me. It’s a great tool and one I’d highly recommend.
The Final Steps
For Young Adults, there are really two main pillars of financial stability: retirement savings and emergency funds. If the thought of saving for retirement feels too distant, remember, it’s never too early to start (especially when you factor in compound interest). But if you’re not quite ready to dive into retirement savings, setting up an emergency fund is a solid alternative. An emergency fund (especially one using an HYSA) is your safety net, shielding you from financial hardships when unexpected expenses arise. Having a cushion of cash will keep you out of trouble and provide peace of mind.
Now, let’s fast forward to retirement savings. When you’re ready to embark on this journey, take full advantage of employer-sponsored 401(k) or Roth plans. These plans offer favorable tax treatments, allowing your money to grow more efficiently. Don’t forget to maximize any employer matches available to you!
So whether you’re setting up an emergency fund or saving for retirement, take control of your financial future. Remember, the sooner you start, the better. Equip yourself with knowledge, make wise choices, and watch your financial well-being flourish. You’ve got this!
