Most young adults starting off on their own aren’t experts when it comes to personal money management. As a result, they often encounter financial difficulties that become valuable lessons on how to better manage money. Money management is neither as easy nor as difficult as you may have been led to believe. You don’t have to be a math genius to get it right, but it does take a lot of practice!
So here are some tips on how to manage money as a young adult:
- Learn restraint: When it comes to money management, restraint is what most young people lack. Too often, they give in to temptations without thinking twice. The first thing is to learn when it comes to money management is self-control. When you see an item you’d like to purchase, think very carefully before buying it – even if you can afford it. It takes time and patience, but you learn restraint with continued practice.
- Keep track of your spending: This is another area where most young adults have difficulty at first. As long as they have some money, they spend left, right and center – but when the money runs out they wonder where all that money went. This is the result of not keeping track of their spending. You don’t need to learn accounting to keep track of your money. A simple record of your daily purchases on a spreadsheet or your cell phone will do the trick to help you see clearly where your money is going.
- Create a budget: Take the time to design a budget for yourself. Many young adults do not follow a budget, and as a result end up spending beyond their means and getting themselves into debt. After tracking your spending, you can start to assign money to each of your expenses, such as groceries, utilities, transportation, housing and entertainment. Spend no more than you have coming in, and you can avoid having to borrow.
- Set some money aside for emergencies: One can never predict the future, and that’s why you must always be prepared for emergencies. Create an emergency fund and put some money in it every month – even just $10. Make sure that you do not touch the money except in case of a real emergency.
- Start saving for your retirement: This is an essential part of how to manage your money. If you don’t start saving for your retirement at a young age, you may not be able to save enough to last your retirement. Therefore, you should start saving right from your first paycheck. Because of the way compound interest works, the earlier you begin saving, the less money you will have to put in your retirement fund to end up with the amount that you will need to retire. If you manage to save up enough, you may even be able to retire earlier than you thought.
Education is essential if you want to be great at managing your money. Take a look at CCSAC’s Education Resources to learn more about budgeting, money management and debt management.