he younger you are, the more time there is for you to ultimately start saving up your money. If you went to college, there’s a good chance you will need to pay back some school debt. Even if you’re a young adult and debt of any sort may not be an issue for you right now, there’s always time to start saving up for various expenses. These include buying your very first home, car payments, going on vacation, and retirement! Follow along for more information on how you can save your money in the most effective ways as a young adult.
Actively track what you spend money on
Bottom line, always keep an eye on where your money goes! It can be so easy to adopt the mindset of it being okay to spend all your money when you can make it back later. However, you can start saving up your money for important things to come in the future like retirement. Tracking what you are spending money on helps locate bad spending habits, and ultimately saves you as much as possible. If you are using a debit or credit card to pay for most expenses, review your bank statements frequently as a way to track how much you’re spending. If you pay with cash for most items, keep track of how much money you have before you are spending money and how much you have left after you purchase things.
If you are still struggling to track your spending habits, check out free online money management services such as Mint. Mint brings all of your financial accounts together and categorizes transactions. Mint will also let you set budgets and help achieve all of your savings goals, and you can expect all of your personal information to remain safe and secure. Mint offers bank-level data security and will alert anyone of any suspicious account activity.
Adopt the 50/30/20 rule
If you’re not familiar, the 50/30/20 rule refers to the way many money conscious people match their savings goals with their spending habits. For example, fifty percent of all your money will go towards essentials. These include bills and expenses you must pay every month such as rent, food, transportation, and more. Thirty percent of your money will go towards your “wants” of the month. Use this money wherever you choose but use it wisely! You might want to spend this money on a new pair of shoes you’ve had your eye on, or maybe weekend trips, coffee runs, and more.
The last twenty percent of your money will go to savings. This category should be focused on last. Make sure you are able to pay for all of your essentials and other necessary items before you think about your savings. While it is important to start saving up your money as soon as possible for the future, make sure you and all of your needs are being taken care of in the present moment! Your savings account will increase over time, don’t stress too much with what you can’t control.
Pay with cash or debit for most items, not credit!
It’s important to learn the lesson of working for your money and spending it that way, rather than relying on things like credit cards for most of your expenses. If you are paying with cash or by debit card, money is deducted from your checking account immediately. If you are paying with a credit card, this is more like a high interest loan. The more items you purchase on a credit card, the more likely you are to have to continue paying interest on these items for years and years to come.
While there are downsides to using credit cards too often, there are advantages. Credit cards can offer generous rewards and help you to build your credit score. However, you must only use credit cards to your advantage. Credit cards should not be used for large/frequent purchases. Credit cards should be reserved more for emergencies and occasional purchases. For example, use your credit card on small purchases every once in a while such as a cup of coffee or a pack of gum! This will help you to build your credit, without overspending your money.
Avoid bad advice, do what’s right for you
As young adults, we are all on our own individual path to creating the rest of our lives. Different circumstances may vary, some of us are working to pay off our school debt and find full time employment. Maybe we are just trying to save up money and move out! Either way, we need to work with what is best for us all individually. It may not always be the best idea to go for a very big purchase such as buying a house as a young adult. Take the time you need to save up your money, before you embark on purchases that will take all the money you have away.
We may feel pressure from friends and family. We see that so many of our friends are living in their own places and we may have more frequent conflicts with families if we are living with them all the time. However, it may just be a better option for you to face some of those challenges initially so you are able to make the most out of your long term life goals. Save money now, and live more happily and free for a longer period of time once you build up the resources!
Understand taxes
It’s important for every young adult to learn how income tax works. When you are offered a salary by a company, you need to determine whether or not that salary will be enough for you and your savings after taxes. There are many online calculators available to help you estimate your work salary after tax. Visit a site such as PaycheckCity. These calculators help you decide your gross pay, how much money will go into your taxes, and your net pay.
In the United States, low-income earners are taxed at a lower rate than high-income earners. This means that you must understand the marginal tax rate. If you end up finding a job with a salary higher than your current job, you will have to consider paying a higher tax rate. Keep in mind that tax amounts vary on your state of residence. If you happen to be moving out of state for a new job, do your research into what their tax rates are to determine if that will ultimately be a more beneficial option for your future.
Negotiate salary
There are many ways to save money, but two of the most popular options are to simply lower expenses or find a way to increase your monthly salary. If you feel that you deserve to be paid more for your work, consider speaking with your boss about an increase in salary. Let them know your reasoning and why you deserve it. The worst thing that could happen would be for your boss to say no. If your employer does agree to increase your salary, this could be very beneficial for you now and in the long run! As young adults, it can be difficult for us to garner the confidence to stick up for ourselves. If you are anxious about negotiating your job salary with your employer, check out this article with some great tips. Build your case, tell the truth, and stay positive!
As we continue to grow into adults, many of us experience change and pressure very rapidly. We are worried about our future careers and finding stable jobs. Once we do find a job however, that doesn’t always erase our financial burdens. A lot of us find it a struggle to get by day to day, let alone having the means to save up the money to sustain our future. Now is the most important time to start saving up our money, even if it is just little by little. Think of the future house you want to live in, the family you want to raise, the cars you want to buy, the vacations you want to go on, etc. Start saving up your money now, and you’ll find yourself much more stress free later on!
