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Money-Saving Financial Advice for Young Adults
There are few things more exciting in life than moving out of your parents’ home and taking those first few steps on your own. But facing the world of adulthood can also be incredibly complicated. While it may be tempting to put financial planning on the back burner and focus on your immediate financial priorities, the decisions you make today have the potential to affect you for the rest of your life! Even if you’re not sure what to do with your life just yet, take the time to develop a solid financial plan so you can keep all of your paths open. Here are some awesome budget-friendly tips to get you started.
Practice Preventive Financial Habits
Like physical health, our financial health is dependent upon good habits and ongoing care. Take a preventive approach to your finances so you can avoid large, unexpected expenses that may leave you vulnerable to debt or poor credit. One way to do this is to take good care of your most expensive possessions, like your car. For example, it will cost you a lot more to fix your car after it breaks down than to pay for regular upkeep. Get familiar with your vehicle’s maintenance needs and learn how to save money on automotive products, such as windshield wiper blades, so you can prevent your car from becoming a money pit. Shopping online from deal sites like Rakuten is a great way to find discounts on car replacement parts—and you might even get some cash back too!
Preventing financial problems is always better than looking for a cure. Besides taking care of your valuable possessions, it’s also worthwhile to insure yourself against large expenses. For example, renters insurancerenters insurance will cover your possessions, medical bills, and living expenses if something happens to your apartment. Health insurance will protect you from racking up major debt in the event of an unexpected health issue. Disability insurance will protect your ability to earn money if you become unable to work due to sickness or injury. You can save money on all of these types of insurance by shopping around and comparing rates from several different companies.
Start Saving Today
While certain savings goals—like building a retirement fund or buying a home—may be years down the road, it’s important to get started now. If you start putting money away today, your wealth will begin to snowball rapidly thanks to compound interest. Even small contributions of $100 a month will add up and make a difference over time, so start saving whatever extra income you have.
Separate Needs from Wants
According to SmartAsset, learning to separate your needs from wants is an essential element of budgeting. Needs are those essential things that you can’t go without, including housing, food, and transportation, while wants are items and services that enhance your life, such as entertainment or eating out. If you’re not careful, impulse purchases will eat up your income before you get a chance to save anything. Plus, seemingly small purchases—like your daily latte—can end up costing hundreds to thousands per year! Differentiating between your needs and wants will help you form healthier spending habits.
Stick to a Budget
Budgeting will help you better understand what you can afford and how you can make the most of your income. Keeping a budget will also help you see where your money is going, so you can avoid spending money on fees, services, and purchases that are getting in the way of your goals. Experian recommends a 50/30/20 budget, spending 50% of your income on needs, 30% on wants, and 20% on savings and debt payoff. If you’re spending too much on wants, you may want to make some budget cuts so you can afford to contribute more towards your needs or savings.
As you venture out on your own, try to limit frivolous spending and prioritize saving for the future. Developing healthy money habits now will help you avoid common financial mistakes that can really limit your options as you get older. Even if you don’t have a lot of money to work with at the moment, saving just a small portion of your monthly paycheck will set you up for greater success down the line.