Financial Tips for Young Adults
Around the world, young people aged 18 to 34 are faced with rising education fees, living, and transportation expenses and, due in part rising prices and inflation, the need to save more for life milestones such as the purchase of a first home, marriage, starting a family, and retirement. Many are so strapped for money that they rely on the financial help of their parents or others.
The often-resulting financial struggles can cause emotional problems including low self-esteem, feelings of anger, guilt, regret, and shame as well as impaired cognitive functioning. In other words, you’re not able to focus on your relationships or solve problems as well as usual when you’re worried about how you’re going to make your student loan payments.
If you are experiencing financial stress, rest assured that you are not alone. It may seem near impossible to overcome your money problems, but it can be done with proper planning – and by sticking to the plan. The act of starting the planning process itself is a positive first step that will make you feel better.
Write down all your expenses. Make a complete list of your weekly, monthly, and annual expenses from rent or house payments, to your Internet and cable fees, loan payments, any regular deposits to a savings account, what you spend on groceries, eating out, entertainment, and clothing, to your telephone bill(s).
Calculate how much you spend in each category. In order to reduce your spending, or if the total of all the categories you’ve determined is more than your monthly income, review each category and determine where you can reduce or cut out expenses altogether. If at all possible, don’t reduce any debt repayments or deposits into a savings account, these should have priority.
Change your mindset. Learn to understand your mindset when it comes to spending money. Do you buy things just because you want them, or because you need them? Are your purchases influenced by others who may appear to always wear nicer clothes, drive nicer cars, or have the latest model cellphone? Before buying something, take a deep breath and ask yourself: “Why do I need this?” Asking yourself this question several times will help you to start understanding your true motivation.
Create a budget and track your expenses. Create a budget based on the work you did writing down and (re-)calculating your expenses, then start tracking your actual spending. Budgeting is telling your money where to go instead of wondering where it went and the only way you will know if you are overspending; even small expenses can throw off your budget.
Bear in mind that your budget is flexible. For example, you might splurge during an evening out, but then you’ll have to adjust your grocery shopping budget to cover the extra spent.
Take the time at the end of the month to make adjustments to the following month’s budget so that it will work for you.
Adjust your lifestyle and live within your means. You may need to make adjustments to your lifestyle in order to live within your budget. This may be frustrating at first, but with time you should be able to find a balance you can live with.
Examples of lifestyle adjustments you might consider include:
· Eating out less often
· Using carpooling, shared taxis, or public transportation to lower the cost of transportation
· Eliminating expensive cable costs subscriptions and choosing less expensive alternatives such as Netflix and Anghami
· Limiting shopping sprees
· Decluttering and selling stuff you don’t need for extra cash (getting rid of stuff you don’t need is a surprisingly good way to clear your mind to boot)
· Finding a roommate to share the rent and utilities or renting out a spare bedroom on Airbnb
· Using your talents and skills to earn extra money on the side: Maybe you’re a great photographer or trusted house or pet sitter. You might have tutoring skills. Or strong social media skills.
· Do not hesitate to inform your family and close friends about your new financial plan so they can be considerate
Avoid going into (further) debt. Focus on increasing your income and savings, rather than giving in to the temptation to borrow money or use a credit card for anything other than an emergency. There are many banking products and facilities easily available to you, but these can drown you in unpaid debts.
In debt already?
If you are in debt already, take action as quickly as possible so that you can get ahead financially. Create a debt payment plan and start by listing your debts in order of the lowest to the highest balance, or the highest to the lowest interest rate. Then pay them off in that order. Once the first debt is paid off, add the money you were paying toward it to the payments you’re making on the second debt, and continue this process until you’ve paid off all your debts.
By all means, avoid taking multiple loans to pay back a different loan or using your credit card. If you don’t pay back the entire balance in full by a payment’s due date, you will not only be charged interest on the remainder of your main balance but also on the interest charges of prior months. This can add up and lead to further debt.
Start an emergency fund. No matter how much you owe in credit card debt or loans, and no matter how low you find your income to be, find some amount – any amount – in your monthly budget to save as an emergency fund. (Don’t make your credit card your emergency fund!)
Knowing that you have some money saved for emergencies, can help you sleep better at night. Also, once you’re in the habit of putting money away each month without exception, soon you may have more than just emergency funds saved up.
Educate yourself about personal finance. Ask an expert, read a few basic books, or look for training programs or free online courses that can help you learn to better manage your income and expenses, save, invest, and plan for retirement.
If you’re like millions of young adults around the world, you’re likely facing greater financial challenges than your parents and grandparents ever did. Start with these steps to get on track, get out of the debt circle, and stay debt-free – and boost your emotional health while you’re at it. Most important is to stay optimistic in difficult financial times!
