8 Important Financial Life Lessons for Young Adults
Updated: Aug 19, 2022
A high school curriculum rarely includes a class called "Finance for Young Adults." Many young folks are unaware of how to handle their money, seek credit, and get or stay out of debt as a result of this terrible absence.
States are beginning to address this deficiency; by 2020, 21 states will require high school students to take a personal finance course, and 25 will require them to take an economics lesson.
At the very least, a part of the future generation should benefit from this. But, for those who have graduated from high school, here are eight of the most crucial financial concepts to grasp. These financial suggestions are intended to assist you in living your best financial life and making the most of the opportunities available to you.
1. Self-Control is an important skill to learn.
If you're lucky, your parents taught you how to do this as a child. If not, remember that the sooner you master the discipline of deferring gratification, the easier it will be to manage your personal money.
Although you may buy anything on credit the moment you desire it, it's wiser to wait until you've saved up enough money to make the purchase. Is it really worth paying interest on a pair of trousers or a box of cereal? A debit card is similar to a credit card in that it withdraws funds from your checking account all at once, preventing you from accruing an interest-bearing debt.
If you have a practice of placing all of your purchases on credit cards even if you can't pay your account in full at the end of the month, you may still be paying for those products in ten years.
Credit cards are convenient, and timely payment helps you develop a decent credit score. Some even have enticing incentives. Make careful to pay your amount in full when your bill arrives, with the exception of extraordinary situations. Also, don't bring more cards than you can manage. This financial tip is critical for establishing a good credit history.
2. Take Charge of Your Financial Future
If you don't learn to handle your money, others will discover methods to do so for you. Some of these persons, like dishonest, commission-based financial advisers, may have bad intentions. Others, like Grandma Betty, who truly wants you to buy your own house even if you can only afford one by taking out a dangerous adjustable-rate mortgage, may be well-meaning but not realise what they're doing.
Rather of relying on others for guidance, take responsibility and study a few fundamental personal financial books. Once you've equipped yourself with information, don't let anybody catch you off guard—whether it's a significant other who steadily drains your financial account or buddies who want you to go out every weekend and waste a bunch of money with them.
3. Understand Where Your Money Is Going
After reading a few personal finance books, you'll learn how critical it is to ensure that your spending do not surpass your income. Budgeting is the best method to do this. When you see how much your morning coffee costs over the course of a month, you'll understand that making tiny, reasonable changes in your daily spending may have the same influence on your financial status as obtaining a raise.
Furthermore, keeping your recurrent monthly costs as minimal as possible will save you a lot of money in the long run. Even if you can afford an amenity-packed apartment today, choosing something simpler may allow you to buy a condominium or house sooner than you would otherwise.
4. Create an Emergency Fund
"Pay yourself first," one of personal finance's most-repeated mantras, is one of the most-repeated mantras. No matter how much you owe in student loans or credit card debt, and no matter how low your wage appears, it's a good idea to set aside some money in your budget each month for an emergency fund.
Having money set up for emergencies might keep you out of financial difficulties and help you sleep better at night. Also, if you get into the habit of saving money and seeing it as a non-negotiable monthly cost, you'll soon have more than simply emergency funds saved up—you'll have money for retirement, vacation, or even a down payment on a house.
5. Get a Glimpse of Taxes
Even before you receive your first paycheck, it is critical to understand how income taxes operate. When a firm gives you a beginning wage, you must understand how to assess if that income will provide you with enough money after taxes to satisfy your financial obligations—and, hopefully, your ambitions.
Fortunately, there are a plethora of online calculators, such as PaycheckCity.com, that take the guesswork out of calculating your payroll taxes.
These calculators will show you your gross income, how much is deducted for taxes, and how much is left over—also known as net pay or take-home pay.
6. Safeguard Your Assets
To ensure that all of your hard-earned money does not disappear, you must take precautions. Even if you can't afford them all right now, consider the following steps:
If you rent, acquire renter's insurance to cover your belongings in the case of a burglary or a fire. Read the policy carefully to determine what is and isn't covered.
Disability insurance safeguards your most valuable asset—your capacity to make a living—by providing you with a regular income if you are unable to work for a lengthy period of time due to sickness or accident.
If you need help managing your money, look for a fee-only financial planner who will provide you unbiased advice that is in your best interests rather than a stockbroker.
Remember that you don't need any expensive degrees or a unique background to become an expert in financial management. If you follow these six financial principles and financial recommendations in your daily life, you may be as financially successful as someone with a hard-earned MBA in finance.
Thanks for reading till here !!!
1. Council for Economic Education. “Survey of the States,
2. Internal Revenue Service. “Retirement Topics — Contributions,
3. Paycheck City. “Self-Service Payroll,
4. HealthCare.gov. “Attention: Enroll or Change Your Health Plan by August 15,
5. The White House. "American Rescue Plan,
6. U.S. Department of the Treasury. "Fact Sheet: The American Rescue Plan Will Deliver Immediate Economic Relief to Families