Personal finance is an extremely important area to master and while it may sound complicated to some, it’s extremely easy to get a hold of your finances and manage them effectively and efficiently. Good personal finance habits can mean the difference between a comfortable life and one full of unnecessary financial worry. Developing good personal finance habits from a young age will equip you for the many adventures and challenges that life has in store.
Good financial management of your money can be a matter of following some simple tips.
Self control
Discipline is the first step when learning about personal money management. Being able to resist the urges to purchase unnecessary items or keep up with your peers is a very important skill to have and is fundamental to keeping you financially stable.
Learn
Invest time and energy into learning about simple finances. Understand how taxes work, how investing works and be curious about ways to make your money go further. Having a simple understanding will provide context and even more motivation to do the best you can with your finances.
Budget
Keeping a personal budget is paramount to good financial habits. Knowing your income and expenses will not only help you survive until the next payday, but hopefully allow you cut down on unnecessary expenses and allocate that money in much more useful ways.
Emergency Fund
Allocating a specific portion of your income towards an emergency fund is extremely important. Planning for unforeseen circumstances such as the loss of your job, repairs to your car and even medical emergencies will ensure that you are not caught out. Start out with $1,000 but make a monthly effort to grow this into a much more significant amount for peace of mind.
Save
This sounds obvious but most young adults do not save any portion of their income. A great way to do this is to set up an automatic direct debit into a savings account. Aim for 10% of your monthly income and you will soon see the value of this habit.
Invest
It’s not enough to simply accumulate cash. In order to get the most out of your money, it’s important to allocate a portion of it to investments with higher growth potential. As a young adult, you have time on your side and can take advantage of higher risk investments in order to achieve a better long term result.
Insurance
With all the focus on saving money and growing wealth, many young adults forget the importance of adequate insurance. Health insurance can help in those times that an unforeseen medical issue requires attention. It can also assist you in taking good care of your health by providing allowances for dental and other care. Other types of insurance to consider are income protection, life and disability insurance, which will cover you and your loved ones in case of the worst. Ensure that the amount is enough to cover your debts and look after your dependents.
Be thrifty
It’s very easy to accept the cost of things nowadays and sometimes a small change in mentality can yield great results. Look for ways to save money, whether it’s not purchasing bottled water every day or staying on top of your bills to avoid being charged fees and penalties.
Following these simple tips alone can be enough to change the course of your financial future. By being disciplined, responsible and always looking to improve your personal financial situation, you will be helping yourself and your dependents to set up a life that is both comfortable and prosperous.
