Why More Young Adults Should Be Looking to Secure Their Financial Future
Young adulthood: New job opportunities, looking to start a family, and many other new adventures on the horizon. With all the excitement, this phase of life also means it is time to get a jump start on planning for your future financially. Young adults have a lot on their plate; student debt, starting to plan for retirement, worrying about the future of social safety nets, and more. Unfortunately, personal finance is not taught in high schools or colleges. It’s important to take the initiative to expand your financial understanding and take the right steps to feel prepared.
Due to the instability in the market caused by COVID-19, an apparent trend of younger people seeking financial help is on the rise.1 While the circumstances aren’t ideal, it is great that people are beginning to take this important step earlier in life.
Taking the Right Steps Towards Financial Security
Feeling financially secure at a young age may seem intimidating, but it is possible and can help alleviate a lot of stress both now and in the future. It is important to continually build your financial literacy, so you can ensure you are making the best decisions. Below are some steps that people under 30 are taking to feel financially secure.
Creating a Budget and Tracking Spending
While it may seem straightforward, creating a budget requires thought and attention to detail. Budgeting can come in different forms, but a good way to begin is to track how much money you receive each month minus how much money you spend each month. When tracking your expenses, split them up into essential and non-essential expenses. This way, you can identify which expenses you should cut back on. For example, you may discover some subscriptions you no longer use, or that you are spending too much on take-out. It is a good idea to put your extra money at the end of each month into an emergency fund. This way, you will always have access to money you have set aside if your income decreases. Planning for the unknown is always a good idea.
Saving for Retirement
Retirement might not seem like something you need to worry about in your 20s, but your older self will thank you in the future if you start planning now. Even saving just a small amount for retirement early in your life can make a big difference, and the longer you wait, the more difficult it will be to plan. A good step to take is to set up monthly contributions to a retirement plan, such as an employer-sponsored 401(k) or an individual retirement account (IRA). Remember, a financial advisor is a great resource to use when it comes to mapping out your retirement plan.
Student loans, credit card debt, and auto loans are common forms of debt for adults of any age. It is important to keep track of your debt so you can pay it off properly to give yourself more breathing room with your budget. Actively managing your debt means you will be able to put more of your money towards your savings and other goals you may have. While debt is normal, it is important to build a budget that prevents you from gaining more. Depending on your situation, you may choose to manage your debt several ways. A good place to start is to write down all your debts from smallest to largest so you can keep track of them all in one place. Try to get the smallest debt paid off within a few months, and then move on to the next.2 This is a way to keep yourself organized and motivated.
Short-Term Goals over Long-Term Goals
At this point in life, short-term goals are very important. Precise goals help hold you accountable and prevent having to face a pile up of issues later in life. For example, you may make it a goal to finish paying off your student debt this year, or maybe you plan to reduce spending money at restaurants for the next 6 months by 50%. Whatever your short-term goals may look like, they will all add up and help you achieve your long-term goals. Remember, no goal is too small. Some goals might feel unnecessary or worth putting off, but in the long run, even the smallest changes of your habits can make a huge difference.
It is never too early to start planning for your future financially. The earlier you begin building your understanding and instituting good habits, the better off your future outcomes will be. Start today and save your future self a lot of stress.
This blog is up to date as of October 2021 and has not been updated for changes in the law, administration or current events.