Financial Lessons Every Young Adult Should Know
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As a nation, we are struggling in a variety of areas. Gas prices continue to climb to heights beyond our imaginations. Food shortages loom as do so many other questions in our economic society. Money management is paramount in figuring out how to get by. This doesn’t just apply to families with children, but to singles and other young adults, as well.
A few weeks ago I received a guest post by an amazing writer, Claire Wentz. She’s written an amazing article about finances for the young adult! I’d like to share this with you today.
Today's generation of young adults is faced with the challenge of navigating a complex and intimidating financial landscape. There are taxes to understand, mortgage conditions to pay, and stocks and cryptocurrency to make sense of. Seriously, why don't they teach this stuff in school?
Start by taking a deep breath. While understanding finances can be challenging, let's start with the basics. This article walks you through the essential financial lessons you need to know to manage your finances and breeze through life.
Compound Interest Is Pure Magic
Did you know that Warren Buffet, one of the world's premier investing gurus, swears by this magic principle? Additionally, did you know that a penny doubled every day for 30 days will leave you with around $5,368,702? That's compound interest right there. As CNBC's compound interest guide reports, this principle can apply to savings, loans, credit card payments, and other interest-ridden amounts. With savings, that means that the earlier you start saving, the more your money will grow. Thus, start investing early so you can harness the power of compound interest to reach your financial goals faster.
Starting Your Own Business
At some point, we all start wondering if putting away so many hours to accomplish someone else's dream is worth it. If you decide to go down the road to startup success, know that it will be challenging but rewarding. Be sure to set yourself up with a business plan and structure so you're ready legally and financially. But also think long and hard about the value your idea brings and if it solves a problem in the market. Investing your time and hard work will be critical in business, but don't start a company you're not passionate about - no amount of hard work can get you over that hurdle.
Live Below Your Means
According to Financial Samurai, many people increase their living standards in accordance with a rise in their paycheck. We suggest living within your means and practicing prudence, even if you see a significant increase in money. This will allow your salary to increase as you age, while you continue to save more the older you get. Maintaining financial stability will become that much easier, and you'll be able to retain a buffer for emergencies and unexpected expenses.
Know Where Your Money Goes
Many young adults spend money as it flows into their account, without much consideration for what they're spending on. You need to ensure your expenses aren't exceeding your income. And the best way to do this? Through budgeting, of course! Take a long hard look at your main costs and see if there's room to cut costs or if there’s anything else you should be saving towards.
The 'pot' method comes in super helpful here - visualize each of your expenses as saved up in little pots. There will be different pots for entertainment, housing, savings, and more. You may just find you're spending too much on your ‘coffee’ pot, meaning it's time to divert funds to a more fruitful venture!
Pay Yourself First
We're going to leave you with a bit of bonus wisdom. No matter how tight your salary or how high your credit card debt is, remember to find a little bit (it doesn't matter how much) to fund your savings account every month. This is sort of like investing in yourself and your financial safety - prioritizing your needs in case something unexpected comes up. You'll be surprised at how much you manage to put away!
With proper discipline, awareness, and a good amount of practice, you too can manage your money to prosper through life. The road to financial literacy can be daunting, but take it one step at a time. Put in the work today to reap the benefits tomorrow!
If you're looking to develop your economic literacy, we've got you covered. Higher Rock's primary objective is educating young adults in economic theory - all for free so that you can go out into the world confident about your finances.
Margie Harding is author of books for kids and teens, as well as Christian devotionals. Reach out to Margie today for more info! authormargieharding@gmail.com
Claire Wentz is a former home health nurse and recognizes that our aging population means many more people will become senior caregivers over the years. Specifically, she is interested in providing assistance and support to those caregivers who do not live near their loved ones. She hopes her writing will inform them, uplift them, and give them peace of mind when they need it.