When you are young, saving might seem like it’s impossible. It might be easy for you to look at your paycheck as a way to survive from month to month without really thinking about the future or saving for any emergencies.
However, you need to actively be putting a consistent amount of each paycheck into your savings and reserving it each month if you actually want your finances to grow.
Saving a little money every month can make a whole lot of difference. We have compiled for you some tips for young adults to manage their money and enjoy their financial freedom while they are most capable.
Always make a budget.
This should not be news to you. Creating and sticking to your budget is one of the best ways you can have financial discipline. This, however, does not mean you’re giving up on the fun, but rather, keeping better track of how you spend your money.
It is never too early to save. You should be thinking of investing for retirement right now. This is because of the way that compound interest works; as such, the sooner you start saving, the less principal you will incur.
Learn how taxes work.
Don’t think you are too young to learn how income taxes work. When you are offered your first job, it’s essential to know how to calculate whether that salary will be enough for you after taxes or not. The good news is that there are so many online calculators that can help you determine your payroll taxes, such as Paycheck City.
For instance, in 2016, in New York, a $35,000 salary will leave you with approximately $26,399 after taxes. Going by this understanding, even if you are considering to get a better paying job, it is essential to understand how your marginal tax rate affects your salary.
Open an emergency fund.
This is another way of saving for future financial hardships. One of the personal financial mantras is “pay yourself first.” Regardless of how much debt you have in loans or how low your salary is, find some amount to save in your emergency fund every month. This will keep you out of financial trouble and give you peace of mind.
Also, if you get into this habit of saving money every month and treating it as a non-negotiable expense, soon you will have more than enough saved in your account. With this, you do not have to worry about vacation money, home down payments, or retirement money.
Clear off all your debts.
While saving money is an excellent way to secure your financial future, you should also look into paying off your debts. If you have credit card debt, consider paying it off aggressively to ensure it doesn’t spiral out of your control. What's more important - buying takeout 4-5 times a week, or contributing about $50 each week to pay off your debts? Put your financial priorities in order.
Live a healthy lifestyle.
If paying monthly health insurance seems complicated, what happens if it’s time to go to an emergency room where just a simple surgery will cost thousands of dollars? If you are uninsured, its high time you applied for some insurance coverage. You never know what might happen in even the next hour.
Check out insurance providers with low rates. Also, remember to keep healthy by exercising daily and eating lots of fruits and vegetables. Maintain a healthy weight, avoiding smoking, and not excessively drinking alcohol, and you will thank yourself later.
Conclusion
Remember, you do not need any unique background or fancy degrees to manage your finances successfully. If you use the above rules in your life, you will be as prosperous as that guy next door with a hard-won MBA. For more advice on how to save money while young, click here.
