”We cannot always build the future for our youth, but we can build our youth for the future” – Franklin Deleanor Roosevelt.
Most youths do not receive strong financial education or instruction. Our educational curriculum does not incorporate courses that aims at unravelling the subjects of finances, money management, practical investment and wealth.
And so we often grow up, much to our chagrin to discover that most of our life are about them!
Although some U.S. states require a personal finance course and others require an economics course for high school graduation in 2022, it is not the case in other parts of the country and the world itself- there are still large knowledge gaps in this age group.
Basic economic and financial education in high schools should help at least a segment of the next generation, but young adults in the crucial post-high school years also need to master core lessons about money. Let’s take a look at eight of the most important rules to get your finances on the best possible track. Never forget that the younger you are, the more time your savings and investments have to grow—so the sooner, the better.
Advertisements
So, it is most essential that young adults take the time to learn a few basic financial rules can help you build a healthy financial future, help them prepare annual tax return themselves and save money, start an emergency fund and pay into it every month, learn and practice saving for retirement as an integral part of any financial life. Starting young is always an edge.
Learn to Budget: Know Where Your Money Goes.
The purpose of a budget is simple: to save money. Budgets benefit future goals and investments, organize finances, and keep people out of
A budget helps create financial stability. By tracking expenses and following a plan, a budget makes it easier to pay bills on time, build an emergency fund, and save for major expenses such as a car or home. Overall, a budget puts a person on stronger financial footing for both the day-to-day and the long term.
Budgeting ensures you’re not spending more than you’re making, allowing you to plan for short- and long-term expenses. It’s an easy, helpful way for people with all types of income and expenses to keep their finances in order.
The best way to do this is by budgeting and creating a personal spending plan to track the money you have coming in and the money you have going out.
Once you actually start tracking how you spend your money, it can be a valuable wake-up call to realize how the cost of buying coffee from a barista every morning adds up over the course of a month. Unlike a salary increase, which is in the hands of your boss to a large extent, small changes in your everyday expenses, like making coffee at home, are completely under your control—and they can have as big an impact on your financial situation as getting a raise.
Keeping your larger monthly expenses—like rent—as low as possible can save you even more money over time. Even if you can swing an amenity-packed apartment right now, choosing a simpler place—and banking the cash you save- could put you in a position to own a condominium or a house much sooner than your friends who are paying high rent.
Practice Self-Control: Pay With Cash, Not Credit
Self-control will solve majority of your problem, especially financial ones. If you are able to learn delay gratification
for that the sooner you learn the essential life skill of delaying gratification, the sooner you will keep your personal finances in order as a matter of habit.
One of the most important ways to exercise self-control with your finances is also very simple. If you wait until you have saved the money for whatever it is you need, then you can put all everyday purchases on a debit card instead of a credit card. A debit card deducts the money from your checking account immediately (with no additional fees), but a credit card—unless you can afford to pay off the balance in full every month—is actually a high-interest loan. If you get into the dangerous habit of putting all your purchases on credit cards, then not only will you be paying interest on a pair of jeans or a box of cereal, but you could also still be paying for those items in 10 years.
Credit cards are certainly useful; some offer great rewards; paying them off on time helps you build a good credit score. However, it is essential to use them to your advantage- not to the advantage of the lender who profits from your bad habit of racking up interest-bearing balances. Keep credit cards for emergencies only—and always pay your balance in full when the bill arrives. Also, don’t apply for every credit offer you receive—and never carry more cards than you can keep track of.
Practice Self-Control: Pay With Cash, Not Credit
Self-control will solve majority of your problem, especially financial ones. If you are able to learn delay gratification
for that the sooner you learn the essential life skill of delaying gratification, the sooner you will keep your personal finances in order as a matter of habit.
One of the most important ways to exercise self-control with your finances is also very simple. If you wait until you have saved the money for whatever it is you need, then you can put all everyday purchases on a debit card instead of a credit card. A debit card deducts the money from your checking account immediately (with no additional fees), but a credit card—unless you can afford to pay off the balance in full every month—is actually a high-interest loan. If you get into the dangerous habit of putting all your purchases on credit cards, then not only will you be paying interest on a pair of jeans or a box of cereal, but you could also still be paying for those items in 10 years.
Credit cards are certainly useful; some offer great rewards; paying them off on time helps you build a good credit score. However, it is essential to use them to your advantage- not to the advantage of the lender who profits from your bad habit of racking up interest-bearing balances. Keep credit cards for emergencies only—and always pay your balance in full when the bill arrives. Also, don’t apply for every credit offer you receive—and never carry more cards than you can keep track of.
The more you invest and the earlier you start retirement savings, the more you will have more time and potential to grow. By investing early and staying invested, you may be able to take advantage of compound earnings. “Make money on your money” is the concept behind compounding and “interest on interest.”
Another reason it is important for you to start saving for retirement early is that you can take advantage of compound interest, the less principal you have to invest to end up with the amount that you need to retire. . One of the reason it’s important to start saving as soon as possible is that having a longer horizon gives compound interest more time to work. The earlier you start saving, the less principal you have to invest to end up with the amount that you need to retire.
Company-sponsored retirement plans are a particularly great choice. Not only do you get to put in pretax dollars (which lowers the income tax you pay), but many companies will also match part of your contribution, which is like getting free money.
Beware of Bad Advice: Educate Yourself.
Financial education is very critical for your adult, and you must be ready to assess very trustworthy financial experts.
Instead of relying on random advice from unqualified people, take charge of your own financial future and read a few basic books on personal finance. Once you’re armed with knowledge, don’t let anyone get you off track—whether it’s a significant other who siphons off your bank account or friends who want you to go out and blow tons of money with them every weekend.
Acquire a Good Understanding of Taxes
Taxes affect so many parts of your life that you may forget different ways to save. If you fail to consider the tax implications of a big financial decision, you could end up wasting a lot of money.
Before you even get your first paycheck, it’s important to understand how income tax works. Though you may need the services of a expert, take the time to learn to do your own taxes. Unless you have a complicated financial situation, it may not be very hard.
Start an Emergency Fund [Pay Yourself First]
An emergency fund is an essential part of a solid financial plan. It can help pay unexpected expenses, alleviating the need to to use high-interest credit cards or taking out a loan. Having an emergency fund can provide peace of mind, an assurance that you have money when an unexpected expense happens.
It can be a good idea to save your emergency fund in a bank account that’s dedicated to this purpose. Don’t include your emergency savings as part of your everyday savings or checking accounts. In fact, some experts recommend keeping your emergency fund account at a different bank entirely to avoid the temptation of dipping into it. Saving cash at home can be risky, because the money could be lost, stolen, or destroyed, such as in a fire—the types of events you are saving to survive.
If you put your cash into a standard savings account, it will be secure and available whenever you need it. However, that kind of account will earn almost no interest—which means that inflation will erode the value of your savings over time. Instead, you can put your fund in a high-yield savings account, short-term certificate of deposit (CD), or money market account. Just make sure the rules of your savings vehicle permit you to get to your money quickly in an emergency.
Protect Your Health
You must protect your health at all cost. If you are uninsured, apply for health insurance right away. It is much easier than you think to wind up in a car accident or trip and fall down a flight of stairs.
If you are employed, then your employer may offer health insurance, including high-deductible health plans that save on premiums and qualify you for a Health Savings Account (HSA).
It also makes excellent financial sense to build staying healthy into your daily routine as soon as possible. Common-sense health maintenance is very straightforward, and you’ve heard it all before. Eat fruits and vegetables, maintain a healthy weight, exercise, don’t smoke, avoid excessive alcohol consumption, and drive defensively. Not only will you feel better physically right now, but these behaviors can also save you on medical bills down the road.