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Being a young adult can be challenging. You’re fresh out of high school and trying hard to figure out which path in life you are going to take.
There are also a lot of financial things to think about. If you aren’t careful, you can get yourself deep in debt – and it could take years to dig yourself out of the financial hole you found yourself in.
Avoiding financial pitfalls as a young adult can be difficult, especially when you don’t have a lot of life experience to draw from. There are some things you can do, however, to help you stretch your dollar and do a better job of managing your money.
The following are 20 financial tips for young adults to consider.
1. Create a Budget
One of the simplest and best things you can do as a young adult is to create a budget. A budget can prevent you from overspending – as long as you stick to it.
Budgets are very easy to make. They don’t need to be anything fancy. You could create a handwritten budget on a piece of paper if you want.
The idea behind a budget is to take your monthly income and allocate portions of it to certain expenses. For example, you could allocate $200 of your monthly income to entertainment. When you reach $200 in spending for the month on entertainment, you know it’s time to either cut back or stay home until the month starts over again.
2. Choose Your College Major Carefully
It’s important to understand that not all majors lead to lucrative careers. Some majors are definitely better than others in the job market. Because of this, you should choose your major carefully.
If you don’t know which major you want to pursue when you start college, it’s important not to spend too much time figuring it out. The longer you spend in college, the more you’ll have to borrow to reach the finish line (graduate).
When choosing a college major, think very carefully about the career options the major leads to when you graduate. Do those careers pay well? Can you see yourself in that career for the rest of your life? If not, it might be worth your time to explore other careers and majors.
3. Avoid Expensive Colleges and Universities
Earning a college degree that leads to a good-paying job is a good thing. Going deep in debt with a student loan that could take many years to repay is not.
Avoiding expensive colleges and universities can help you save big on college expenses. Many people think that the key to success in life is graduating from a “good school,” but many of these schools are very expensive.
Many factors determine your success in life. The school you graduate from is just one of many. The career you choose, for example, may be a more important choice than the school you attend.
You can become an elementary school teacher, for example, from an affordable state school or an expensive private school. Both schools lead to the exact same career.
There are many fine state schools that are much more affordable than private or out-of-state schools. Also, don’t overlook community colleges. These great schools are the best bargain in all of higher education. They also offer many two-year degree programs in some great-paying careers.
4. Learn to Negotiate
Learning the fine art of negotiating can save you a lot of money in life. Of the financial tips for young adults, this one could save you thousands over your life in vehicle and home purchases.
Many people expect shoppers to haggle with them on their prices. In some countries it’s the norm. If you accept and pay the asking price, vendors will think you are a chump.
It’s common to negotiate when purchasing a vehicle or home, but there are many other things you may be able to negotiate. Just a few include:
- Your Salary
- Gym Memberships
- Bank Account Fees
- Medical Bills
- Professional Services
- Cable Bill
- Cell Phone Bill
- Home Repairs
- Credit Card Fees
Not every price that is presented to you is a company’s final offer, although they may want you to think it is. It never hurts to ask if you can have a lower price.
5. Shop for Used Items
Whenever you need or want something, do you always buy new? That’s what most people do. Depending on the item you are shopping for, you may be able to save a lot of money by seeing if you can find it used first.
Shopping for used items has never been easier thanks to the internet. There are now many buy and sell websites and apps that let you narrow your search to find exactly what you are looking for. You can search in your community or expand your search to cover the nation or the world. You can find used items on eBay, Facebook Marketplace, Craigslist, OfferUp, and other places.
6. Look for Cheap Entertainment
As a young adult, you are probably going to want to do a lot of fun things with your friends. And that’s totally understandable. Going to concerts, movies, restaurants, sporting events, and doing other things is a lot of fun.
But it can also be very expensive.
Instead of always spending money on entertainment, why not look for some free things to do instead? You could have a few friends over, for example, and watch a movie. Perhaps you could make some popcorn or another treat.
There may also be some things to do in your community that are either affordable or don’t cost much. Some communities host free events that you may enjoy like concerts, fireworks displays, author meet and greets, and other interesting things. The larger the town or city you live in, the more affordable entertainment options you will be able to find.
7. Establish an Emergency Fund
Establishing an emergency fund is something you don’t want to postpone. It’s one of the most important things you can do to improve your finances.
Why do you need an emergency fund?
Because sometimes things happen that we didn’t expect and couldn’t have foreseen. You could suddenly lose a job, for example, and need some money to pay your bills with until you land another job. Or maybe your vehicle suddenly breaks down and you need some money to pay for a repair.
How much you save in your emergency fund is up to you. Many financial experts recommend that you save enough money to cover at least 3-6 months of living expenses.
8. Start Saving for Retirement ASAP
It comes a lot sooner than you think. No, I’m not talking about the start of football season. I’m talking about retirement.
As a young adult, your retirement years may seem like they are far off into the future, but the older you get, the faster the years seem to go by. And before you know it, it’s retirement time.
When you reach your golden years, you’ll be thankful that you started saving early in life. If you aren’t sure how to get started, talk to a financial advisor to develop a plan to start saving money as soon as you can. Thanks to the power of compounding interest, the longer your retirement nest egg has to grow, the more you may have when you finally retire.
9. Avoid Cosigning Loans
If you are working a job as a young adult and you have a steady income stream, one of your friends may approach you at some point and ask you to cosign a loan. Maybe that person wants to buy a car and has bad credit. Whatever the case, that person needs someone with good credit to qualify for a loan.
Cosigning for a loan is always a bad idea. If the person you are cosigning with doesn’t make his or her payments on time, it doesn’t just cause problems with that person’s credit, it could negatively affect your credit score, too.
If you cosign for a loan, you are guaranteeing that the loan will be repaid. If the person you are cosigning for stops making payments on the loan, the lender could go after both you and the other cosigner to get their money back.
10. Watch Your Credit Score
Your credit score is more important than you may think. In addition to helping you get a loan, credit scores are also used in other ways. Many employers check job applicants’ credit scores before making hiring decisions. Credit scores are also checked by landlords when deciding who to rent to.
You can obtain free copies of your credit report from the three credit reporting agencies once per year. If you find incorrect information in your credit reports, you can open disputes with the credit reporting agencies.
11. Learn to Cook for Yourself
Do you enjoy eating out at a nice restaurant? Most people do. It’s nice to let someone else do the cooking and cleanup while you get to do the most enjoyable part – eating a nice meal.
But if you eat out often enough, it can get expensive in a hurry. If you eat out at a nice restaurant a couple of times a week, it could put a major dent in your budget.
A great way to save on food is to cook meals at home as often as possible. There are many advantages to cooking your own meals, like knowing exactly which ingredients are going into the food you eat. Many people find that they really enjoy cooking and they are constantly on the lookout for exciting new recipes.
In addition to cooking for yourself at home, you may also want to consider packing your lunch for work. Eating out at work can also be very expensive. If you pack your lunch, you can plan your meals to maximize your savings.
12. Learn to Save Money on Groceries
Becoming a savvy shopper at the grocery store is one of the easier ways you can save money. There are many strategies you can use to lower your grocery bill, like using coupons. Many people overlook coupons thinking they won’t save them much money, but with careful planning, the savings can be significant.
Shopping at discount grocery stores is another way to save money on groceries. These stores are very simple when compared to the big chain stores. They usually have fewer employees, there are no fancy product displays, and overall the stores are smaller.
That’s why their prices are often much lower than the big chain stores – they have lower overhead. If you have one of these stores in your neighborhood, definitely check it out and compare prices with your regular grocery store to see you can spot any deals.
13. Track Your Spending
The purpose of tracking your spending is to see if you can identify and eliminate any wasteful spending. A dollar or two here and there may not sound like much, but it can really add up if you aren’t careful.
Tracking your spending is very easy to do. You just write down everything you buy in a notebook and then tally everything up at the end of the month. You can then go through your list to see if there is anything you can eliminate or cut back on.
14. Live Simply
What does it mean to live simply?
It means being content with what you have instead of always desiring something newer, fancier, bigger, or more expensive. The philosopher Epictetus once wrote, “wealth consists not in having great possessions, but in having few wants.” This is so true. Having a lot of money and stuff doesn’t make us wealthy, being content is the real measure of true wealth.
Living simply also means not trying to keep up with the Joneses. So your neighbors just bought a new car while you’re driving a reliable older model. So what? Who cares what the Joneses think? People who are always trying to keep up with the Joneses are chasing after status, which is a good way to end up miserable and in debt.
15. Learn to DIY
There are many things in people’s homes that they could do themselves with a little bit of elbow grease and research. And yet many people prefer to push the easy button and spend money to let someone else do it for them.
Instead of hiring someone to paint a room in your home, for example, why not try to tackle the project yourself? Instead of hiring someone to seal your driveway, power wash your walkway, or stain your deck, you may be able to do these things yourself.
The more things in and around your home that you can do yourself, the more money you may be able to save. As you tackle more projects, you will learn more skills that you can apply to other projects. And it’s now very easy to find tutorials and videos for many different projects online.
16. Use Credit Cards Sparingly
Credit cards can be very useful tools – if you use them wisely. Some people, however, treat credit cards like free money and go on spending sprees putting all of their purchases on plastic. This is why some personal finance gurus recommend tearing up your credit cards and only using cash.
Having a credit card can be useful for many things – like booking hotel rooms and making online purchases – but it’s important to never buy more with your credit card than what you can afford.
17. Live Below Your Means
Living below your means is similar to living simply, although there is a slight difference. Living below your means refers to not spending more money than you make. A great way to keep up with this is to create and use a budget (as previously discussed).
Many people get themselves in financial trouble by buying more house and vehicle, for example, than they need and can afford. Living below your means for many means buying a smaller house or living in a more modest community. It could also mean buying and driving a used Toyota instead of a new Lexus or another fancy vehicle brand.
18. Compare Cell Phone Plans
If it’s been a while since you shopped around for cell phone plans, you may be able to save some money by seeing what some other companies are currently offering. The cell phone industry is fiercely competitive, and companies frequently come out with new plans and promotions to entice people to sign up with them.
Most young adults these days use smartphones, and they may be able to save some money by switching to another service provider. When comparing cell phone plans, don’t overlook the discount and prepaid carriers. Many of these service providers use the same cell phone towers as the major carriers. The call quality is often just as good as the well-known carriers – but for less money.
19. Live In an Affordable Community
We can’t always choose where we live. Sometimes it’s necessary to live in a certain town or city to be close to a job. But if you work a remote job, or if you’re in a career that is needed in many communities (e.g., school teacher, nurse, engineer, etc.), then you may be able to save a lot of money on housing by living in a place where the overall cost of living is low.
There are many places where you can buy a house for half of what the same home would cost in a large city. There are also other expenses that may be lower in these communities, like property taxes, utilities, and other things.
Something to consider if you currently have to live in a pricey community because of your job is to try to land a remote job instead. Many companies now hire remote workers, which means you can work from nearly anywhere as long as you have a phone and a good internet connection. FlexJobs is a site that lists many remote positions.
20. Consider Getting a Roommate
If you are currently living alone and your financial situation is tight, you may want to consider getting a roommate. This assumes, of course, that you have more than one bedroom in your home.
With a roommate, you can split all of your living expenses. You can split your rent or monthly mortgage, utilities, groceries, internet, TV, and other things. The savings can be substantial.
Personal finance is such an important topic that you would think that many high schools, colleges, and universities would teach it. Sadly, most don’t. Many young adults have to learn important personal finance lessons the hard way – through experience.
The points mentioned in this article are great starter tips for saving and managing your money. But there are certainly other practical tips to consider. If you are interested in learning more about personal finance, consider reading some books on the subject.
The subject of personal finance is something you can never learn enough about. It’s a subject that should be a lifelong pursuit.