5 Tips for Young Adults Starting Their Financial Independence
Adulthood can be challenging, especially when transitioning into a new chapter, starting your career, and making sense of your finances. Achieving financial independence is possible for young adults with these five money-management tips:
Making positive changes with your spending habits can improve your financial situation, allowing more contributions towards your savings. Taking action as a young adult to cut unhealthy habits pays off in the long-run!
Use these smart-saving strategies:
Prepare more home-cooked meals
Brew your own coffee or tea
Buy in bulk (when possible)
Buy on discount / use coupons
Avoid impulsive purchases / set limits
Did you know there are tons of free resources for financial education, tracking expenses, and budgeting/saving? Visit a public library to check-out influential financial independence books, surf the web for personal finance blogs, or download a budget app. And of course, check out your credit union website!
Start morning rituals by listening to personal finance podcasts for daily motivation, use online financial calculators, and subscribe to monthly newsletters from your banking center. Complete online financial wellness modules to cover beneficial topics and take small quizzes to test your knowledge.
MANAGE YOUR DEBT
Focusing on debt-management boosts your credit score, increases approval for renting/owning a home, and lets future lenders know you’re creditworthy. Two popular management techniques, “debt- avalanche” and “debt-snowfall”, are great for multiple credit cards, student loans, medical bills, or any other debt.
“Debt-avalanche”: Any extra funds leftover from your monthly budget is applied towards the high-interest loan, minimizing interest overtime. The borrower pays off the highest-interest loan first, while continuing minimum payments towards other loans. This tends to be cost-effective, resulting in faster repayment.
“Debt-snowfall”: tackles behavior changes, while gaining momentum & intensity overtime. Similar to a snowball rolling down a hill full-speed, paying off debts from smallest to largest.
ALWAYS PAY YOURSELF
Building an emergency fund prepares you for unpredictable life-events, which can potentially damage your savings and cause immense stress. Common emergencies are car troubles, job losses, medical/dental emergencies, and unplanned travel expenses/ home repairs. It’s best to have 3-6 months’ worth of expenses saved, but this varies depending on your income, household size, and lifestyle.
Committing to pay yourself is effortless when automatically routing 15-20% of your check to your savings account. Prioritizing yourself first means you are serious about investing in your future! Follow these steps to see how much to pay yourself monthly:
1. Calculate your monthly income and expenses (fixed & variable).
2. Subtract your monthly income from your monthly expenses.
3. The final amount depicts the leftover monthly dollar amount.
MEET WITH A FINANCIAL PROFESSIONAL
Financial professionals listen to your experiences/concerns, assist with action-planning, money-saving advice, and debt-management to mentor you on successfully gaining financial independence. Building long-term wealth, protecting yourself from financial risks, and managing your income helps to achieve financial security.
I See Me…Do You C.U.?
For more tips on setting savings goals & smart-saving habits visit our Savings Module!
How has your journey been starting financial independence? Share any tips or ask questions below!