As a young adult, the world is your oyster. This might be the first time you are living on your own and managing your own money. It can be daunting to start off on your own, but with a few tips and tricks, you can handle your finances like a pro and enjoy your newfound freedom.
Take some time to list out all of your expenses. This will show you exactly where your money is going and show you the differences between needs versus wants. With your budget, you can also see if you are spending money in areas that you don’t need. For example, do you have several streaming subscriptions, but only use a few? Or do you have a restaurant or coffee shop habit that you could decrease to save a few dollars? Seeing everything on paper – or in an app – gives you the knowledge needed to spend your money wisely and adjust where needed.
As part of your budget, set aside a portion of your income for savings. The amount you save can vary depending on the rest of your expenses but aim to have three to six months of living expenses in a savings account. It can take some time to get there but starting early and regularly depositing money in your savings account and leaving it alone will set you up for financial success in the future. Most employers will do a direct deposit of your paycheck. Set up a portion to also go directly to your savings account and then you won’t have to remember every month to move money – it will automatically grow.
Be wary of credit cards
Credit cards are a great financial tool. Using a credit card appropriately, meaning you pay off the balance in full on time every month, can help you establish and build your credit score. A credit score is needed to secure a loan for a car, a home or another large purchase. However, be wary of the different credit card offers you might see. Make sure you read the fine print and fully understand how your credit card works. Check your balance daily to ensure your spending stays within your budget. You might want to explore using a preloaded card for certain expenses or using a debit card. A debit card will automatically withdraw funds from your checking account so you can see in real-time how much cash you have to spend.
You should always be on the lookout for fraudulent activity and scams. Hackers and scammers are getting more sophisticated every day, so we all have to stay vigilant. Use technology to your advantage and set up alerts for unusual account activity and check your accounts daily. It might seem like a lot, but you should check your bank accounts every single day. Be mindful about where you share your credit card information online, and make sure sites are secure and that you are on a secure Wi-Fi network before inputting any information.
Power of choice
Ultimately, managing your money comes down to choices and the tradeoffs. Do you stay within your budget by making lunch at home or do you always buy take out? Which car do you buy, new, used or do you lease one? Managing your own money empowers you to make the choices that are best for your lifestyle and budget. Understanding that you hold the power to your financial success is just as important as mastering your budget, credit and online safety.
Abby Wendel, president of consumer banking at UMB.