As a young adult in your 20s or 30s, you’re probably excited about all the opportunities life has to offer, but you’re also aware of increased financial responsibility. Unfortunately, in most high schools or colleges, personal finance is not a required subject. This lack of basic financial education leaves many young adults clueless about how they should manage their finances, apply for credit, or even get and stay out of debt.
We’ve come up with three important things to understand about money to help you be more financially responsible.
Build a Budget
Regardless of your age, the number one money tip that you should follow is to live within your means. You should never spend more than what you’re earning. It’s easy to get into debt but getting out of it is much harder.
This is why it is helpful to have a budget. If you track your spending, not only will you see where your money goes, but you will also be more aware of what you spend your money on.
Start an Emergency Fund
Life can be unpredictable and being prepared for when unexpected things occur will benefit you in the long run. Having a safety net for those unplanned moments, like car repairs, medical expenses, or unemployment, will make it easier for you to bounce back financially.
As a rule for your emergency fund, you should have 3 to 6 months of living expenses saved up. This is where the previous tip helps. If you know how much you’re spending, you’ll know how much you need to save.
Save for Retirement
While retirement may seem a long way away, the earlier you begin, the better. Starting early on your retirement savings is recommended. If you start adding to your accounts now, you’ll see more money later! Start by investing in a 401(k) or IRA. Make sure you also maximize the opportunity if your company offers a matching contribution.
There are also a lot of retirement options to choose from. Read our blog post on Retirement 101 to learn more about the different retirement accounts you can choose from.
These three tips should give you a head start on financial responsibility, but the most important tip is not to compare with others. It’s easy to look on social media and get an elevated, flawless perception of reality and it may seem as if everyone is doing well and affording extravagant things, but everyone’s situation is different! If you would like help with financial planning, RMLEFCU offers personal services to members! Learn more about our financial planning services here or call us at 303-458-6660.