Living by yourself or with roommates comes with great financial challenges that you might have never expected before. You’re now responsible for paying rent, utility bills, insurance, and more.
You might be wondering how to manage it all yourself. Don’t worry. We’ve got just the advice you need. Use these five essential financial tips for young adults to responsibly navigate the world.
Pay Attention to Your Paycheck
You should feel proud of the hard work you put in daily, and the income you receive because of your efforts. But what does each paycheck mean? How much do you really earn each month?
Let’s break it down. Every salary consists of a variation of the following: gross pay, net pay, and deductions. These three categories affect your take-home salary. Gross pay is your total income before any deductions. Net pay, also known as your take-home pay, is what you receive after the IRS and other similar financial institutions withdraw taxes and other deductions. These other deductions could be health insurance premiums, retirement contributions, and possibly, union dues.
Always think about how much money you earn after deductions. Doing so is crucial for establishing a realistic budget and savings and retirement plans.
Track Your Purchases
Congratulations! You’ve received your paycheck. Before doing anything with it, ask yourself: Where is my money going each month? Diligently tracking your spending is the next step to financial success.
Budgeting apps and spreadsheets are beneficial tools to help you oversee your spending. These tools will encourage you to grow and become more mindful of your purchases. Celebrate your successes and note any areas of improvement and lessons learned at the end of each month. Try to see this step as a way to encourage yourself to create healthy spending habits and set yourself up for a comfortable retirement.
Gradually Introduce Credit Cards Into Your Spending Habits
Credit cards can be both a blessing and a curse. While they can help you build a strong credit history, it’s easy to fall into the trap of overspending and accumulating debt.
Start by applying for a card with a low credit limit, preferably one that offers rewards or cash back. Use your credit card for small, manageable purchases (i.e., groceries, gas, prescription medications). Be sure to pay your balance in full each month.
Credit unions often offer great credit card options with lower interest rates and fees than traditional banks. Explore these credit union services to find the best deal as a first-time credit card user.
Don’t Overlook Financial Debt
Young adults who irresponsibly use credit cards in the past or have pesky student loans to pay often ignore the notion of their debt. It’s an overwhelming and intimidating situation to manage. Nevertheless, debt can be a significant roadblock to achieving financial success.
Create a plan to prioritize and pay off your debts, starting with those that have the highest interest rates. Paying off your debts as soon as you can reduces interest, improves your credit score, and makes securing loans easier in the future.
Start a Savings Account
A financial safety net is crucial for feeling secure in your affairs. Opening a savings account is the fifth and final essential financial tip for young adults. It’s the best way to start building your savings, even if it’s just a small amount each month.
Democracy Federal Credit Union offers a wide variety of savings accounts to tend to your needs. You’ll find exactly the right one to grow your funds, from share savings to cash-back accounts.
It will take patience and dedication to improve your finances. Nevertheless, it’s possible when you bank with Democracy Federal Credit Union. Our team of dedicated professionals is here to help you establish a firm foundation for your financial success.