Managing Finances for Young People
The following is a provided guest post
Think it’s time to move out of your parent’s basement and venture out into this big old ball called the real world? Well you might want to make sure that you have all your ducks in a row before leaving. You will find below some helpful tips below that will help you avoid common pitfalls too many young adults make.
Do you have a plan for paying off any debt that you may have accrued in the past couple years? Avoidance may be tempting, but don’t think of it as an option. Try paying more than the minimum monthly payment to reduce the cost over time. Credit cards love it when you pay the least amount because they can easily charge you interest.
If you don’t have any debt, you are ahead of the game. Start putting money into your savings account. You want to be sure to have a “cushion” of money aside in case you run into an emergency such as a job loss or a medical problem. The rule of thumb is to have 3 months of “cushion” in order to give you time to either find a new job or pick up a second job to get back to where you were.
Want that new sweater you saw in the store window or those new tech savvy items? You may want to reconsider. You will need to start cutting back on things that you don’t NEED. In fact, go through all of your material items, from electronics to clothing. Find out what you don’t need or use anymore and sell it on eBay or even have a yard sale. There is always someone looking for something, one man’s trash is another man’s treasure. You could use the extra money from this to put in savings or pay off bills.
When you’re trying to figure out how much you can afford to allocate to rent, always dramatically round downwards. If you’ve never been fully self-supporting before, it’s hard to completely grasp the extent to which every day expenses can add up. Don’t make the mistake of being locked into a year-long contract of monthly spending more than you could afford. Additionally, don’t be in a rush to furnish your new home all at once – find the essentials you need and, slowly, accumulate nicer items as you can increasingly afford them. In the meantime, there are plenty of resources you can turn to add some personality and class to your new digs. Antique stores, student art fairs and crafts stores like A.C. Moore can provide plenty of fun options. Furthermore, for smaller, decorative items like accent pillows, end tables plant holder, etc., don’t be afraid to turn to retailers that affordably sell youthful décor or dorm stuff, like OCM.
A good tool to use when you are trying to figure out when and how to pay your bills would be to start with your paydays. If you are getting paid every other week, than budget so that the bills that are due at the beginning of the month are paid with the previous months check and the bills that are due in the middle/end are paid with the first check of the month. This allows you to always be ahead in your billing cycle. Paying on time will help you build good credit, which will be a great start when you are ready to buy a new car or start a family and purchase a house.
Moving out on your own can be both exciting and a bit scary. However, with the right planning and priorities, you should be able to handle the curveballs ahead. Don’t forget to budget and live within your means. Good luck and enjoy the new adventure that you are embarking on.