Getting your first job can be freeing as well as a little terrifying. After all, what are you going to be doing with all that money? You’ll likely want to be spending it on outings, clothes, and hobbies. Forget researching the best budgeting tips, right? But not so fast! If you, as a young adult, want to look out for your future self and your financial health, then you should follow these financial tips.
1. Focus on paying off your debts first
The first of many financial tips is to focus on paying off your debts first. Many young adults are having to pay their way through school, which can get pretty expensive. If you’re a young adult that is dealing with debt, then your main focus should be on paying it off. According to a study conducted by Ipsos in September 2017, 67% of students that graduated had student debt, and on average, that debt amounted to $22,084. That’s a lot of money for someone who is looking to start their professional career. That’s why it’s important to focus on paying it off as soon as you can. Otherwise, you’ll be stuck paying much more in interest (which averages at 4.20% in Quebec as of January 2022) in the long run.
Focusing on paying off your debt doesn’t mean that you can’t spend any money on leisure activities or things that you want. It just means that you should plan to set a certain amount of money aside per paycheque that will go towards your student loans.
2. Pay all of your wants with cash only
One of the ways to ensure that you don’t dip into the money you set aside for your student loans is to pay all of your wants with cash only. This is one of the best financial tips anyone can offer. Not only does this ensure that you will be prioritizing your debts, but it also helps you keep track of your money and builds great financial habits for the future. When you’re paying with cash, you’re only spending what you have on hand. Seeing the money disappearing more and more will likely want to make you spend less than you usually would. It also makes you pay more attention to prices. Paying with cash therefore makes you appreciate the money you have, and it makes you understand its value.
Although there are advantages to using credit cards, such as racking up points for a flight, there are also advantages to using cash! One of these is that you don’t pay any interest on the money you’re spending. Occasionally, you may also find yourself getting discounts for certain products since merchants won’t have to pay a fee for cash transactions. You may also find many different cash cards that will offer you rewards.
3. Always question your parents’ "budgeting tips and financial tips for young adults”
Although the adults in your life want the best for you and mean well, they sometimes don’t give the best advice when it comes to dealing with your finances. Adults love to give financial advice for young adults, but their tips aren’t always right! The reality is that no one knows your financial situation better than you. When the older generation tells you about the importance of owning a home or investing, and expect you to follow through with their advice — they’re in the wrong. These are all blanket statements that don’t necessarily line up with your personal financial situation. After all, how you be expected to own a house when you’re already dealing with debts and when today’s variable mortgage rates are so unpredictable?
The best thing you can do is to educate yourself on different ways to save money and budgeting tips to figure out what’s best for you. You’ll likely find that the best financial tips you’ve ever come across are the ones you’ve found yourself.
4. Draft a great budget
One of the most helpful financial tips for building a financially healthy lifestyle is to create an amazing budget. Luckily, there are many online tools that will show you how to create a budget! The main idea behind drafting a great budget is that it will help you keep track of all of the money coming in and out of your account.
First, you should calculate how much money you receive as net income. This is the income you receive after deductions like taxes and employee benefit programs. You should then make a tally of all of your expenses. Start with the fixed expenses like your cellphone bill, car payments, minimum payments on debts, etc. Then, check you bank statements and add up all of your variable expenses like groceries, entertainment, and hobbies. Deduct your expenses from your net income, and see what you’re left to work with. A great way to plan your budget is to follow the 50/30/20 budget rule. This rule stipulates that you should spend 50% of your net income on needs, 30% on wants, and 20% on savings.
If you find that you don’t have much left for savings, see if you can cut back on certain costs. If you absolutely cannot, follow this questionnaire in order to see which financial tips and advice can apply to your personal situation. Your road to financial health is just a click away!
