As a young person, it is easy to think that what you do with your money today won’t have a bearing on what kind of life you imagine yourself having in the future. As long as we eventually get a well-paid job then things will work themselves out.
The reality is, however, that if we have bad money habits now, we will always be struggling for cash, regardless of how much we earn.
In fact, a staggering 67% of Canadians are not confident about how they handle their finances.
With this in mind, we have put together great financial tips for young adults, for you to break a cycle that seems to be on repeat in modern society.
1. Build an Emergency Fund
Let’s be honest. No one likes to think about rainy days. But don’t fool yourself into thinking that it is alright to only live in the present. Emergencies that require instant cash are as inevitable as the sun rising each day.
Having no savings means that you will likely need to ask a family member or friend, which could sour relationships long term. Alternatively, you may have to pay for them on credit which could send you down another financial rabbit hole.
For that reason, the most important of our financial tips is to build an emergency fund.
Having a non-negotiable amount you stash away will mean that any unexpected expenses won’t derail your plans for financial freedom. Start with just 10-30% of your salary and adjust accordingly as your circumstances change.
Trust us, you will appreciate resting easy when you need to replace the engine in your car or that wisdom tooth needs to come out.
2. Develop Self Control
We live in a time when everyone wants everything NOW. Whether it is the latest phone or going on great vacations each year, it can seem that if you don’t do those things then you aren’t enjoying life.
But, these things cost money.
While the fear of missing out is real, learning to resist taking out the card for that treat will pay off massively in the long term. On top of that, if you exercise self-control as a habit with your personal finances when you do decide to splurge, it will feel extra sweet.
Try holding back on the little decisions we make each day, like on food, transport, and other treats. Begin to view everything as having a monetary value that is coming out of your bank account, rather than having an “I have the money to pay for it now, so why not?” mentality.
Questions like “Do I need this now or can it wait?” or “How many hours will I need to work to pay for this?” are good mental exercises that can help you in delaying gratification.
Getting it right will mean that your money will end up paying you for your patience.
3. Have a Goal
Achieving things that require a lot of work requires motivation.
How many people do you know have getting fit as their new year resolution? And how many by March will be sitting with you in a restaurant having a hamburger and talking about how guilty they feel because they canceled their gym membership?
Often, this is because they have a target but no accountability or deadline.
When that happens, it is so easy to give yourself excuses. But, setting goals and achievable targets along the way will make it harder to look into the mirror when you take the easy way out.
For goals to work they need to be achievable and have a time limit. You know you should start saving, but why? To buy a house? Set an amount you think you will need for a deposit and an age you want to have it by.
Have the same focus for all your financial decisions and then saving will become a lot more fun.
4. Learn to Budget
So now we come to spending that cash. Let’s be clear, it is important to allow room for treats. As the years go by you will likely end up working harder, and what for, if not to enjoy life?
But with money coming into your life, it is important to recognize what is a treat and what isn’t. It is so easy to forget that things like eating out, getting a coffee, or going to the movies are additional extras in our lives, and by the end of the month those treats can add up to a lot.
That is why it is so important to know exactly how much money is coming in and where you are spending it. Your money is your responsibility and how seriously you take it is often reflected in how much we have at the end of the month.
Be clear about how much you need to spend on necessities, plus how much you need to save based on your financial goals. What you are left over with may only be enough for a couple of those treats each month.
Doing so will mean you won’t develop the habit of living from paycheck to paycheck, something that has become the norm for so many.
5. Don’t Be Afraid to Invest
The idea of investing in anything can seem risky especially if we aren’t earning that much money. But as a young person, now is the time to learn this all-important skill. This can potentially boost your personal finances tenfold.
We won’t tell you which avenue to go down, but we do encourage you to learn about all of them.
Whether you decide to get into stocks, bonds, mutual funds or even just opening a high-interest savings account, having a passive income is becoming more and more essential today. The quicker you get familiar with your options, the more skilled you will become at getting it right as the years go by.
6. Keep Fixed Expenses Low
We live in a subscription society today. Whether it is the latest phone or Netflix, the individual seemingly small amounts can lull us into a false sense of security.
However, when you add everything up, what you are paying for services may be eating a larger piece of your pie than you think.
If you want secure finances long-term, one of the best financial tips is to keep your regular expenses low.
If you are budgeting, your rent, utility bill costs, etc. will be clear. But, adding other things to these fixed amounts that fly out each month should be kept to a minimum.
By keeping them low, you will find you will have more room to stretch your financial legs each month.
7. Protect Your Credit Score
Isaac Newton’s third rule of motion is “every action has an equal and opposite reaction”. Why do we bring this up?
It’s because it is a great way to get your head around how your credit score works.
When you spend money, especially with a commitment like on a credit card, you are leaving a mark on your financial reputation. While it may not seem to affect you much now, the reality is that if you haven’t been taking the time to look after that reputation, you could live to regret it later.
Want to buy that car on finance? Ready to take out a mortgage? All these things are dependent on your financial track record over the long term.
So how do you get a good credit score? Simple.
Pay your bills and anything bought on credit on time.
Over the long term, this is the most important among all financial tips you will find.
8. Get Professional About Your Finances
Ever wonder why there are so many stories about how rich sports and music stars file for bankruptcy or haven’t been paying their taxes correctly?
It’s because they often take financial cues and advice from others without learning about financial management themselves.
While you may not be a multi-millionaire yet, you may have a friend encouraging you to get into cryptocurrency, or your parents may keep dropping hints that you should be looking to buy a house as soon as possible.
These financial opportunities may make sense for them, however, it may not be the right time or the right financial decision for you.
To make sure you always come out on top, take the time to study the basics of financial literacy. Read books, watch videos and learn how money works, taxes, and all.
With even a basic understanding, you will be able to spot what would be a financial landmine for you before stepping on it.
Follow Our Financial Tips for Financial Freedom
As a young person, thinking about the future can be a cause of anxiety as well as excitement. But one clear way to make sure that you can look to the future without any reason for dread is by plotting a clear path to financial freedom.
We hope our financial tips will help you on your way to reaching that goal!
One barrier to getting there can be those unexpected costs that pop up just at the worst time. If that sounds too familiar to you then we may be able to help!
Let us help you get out of a sticky situation by getting a quick loan with us today!