Moving out of your parent’s house and entering the real world? If so, you’re probably feeling a pretty intense mixture of excitement and terror. There are a lot of amazing parts of moving out on your own; for instance, you have the freedom to spend your time the way you like and make the choices that feel best for you. However, freedom comes with risks, and poor financial management is one risk that winds up biting many young adults.
Fortunately, there are several things you can do to get your finances in order. By taking control of your money as early as possible, you give yourself a strong foundation for the future. There's no better time to start saving than right now — you have your whole life ahead of you. Here are a few ways you can give yourself the best financial start possible.
Figure Out Income
Your first job is figuring out your income. By the time you've moved out, odds are you at least have a part-time job. However, that may not be enough to sustain you in the long run. If you're not in school, consider moving to full-time work, or picking up a second gig. This will ensure you have the funds to manage your monthly expenses.
Looking for ways to boost your cash flow? Real estate investment is a lucrative field, and it can be an excellent fit for young people. If you have the funds to get started, a keen business sense, and excellent interpersonal skills, consider running a rental. This will help you bring in extra cash each month, and it's relatively easy to get started compared to different kinds of investments. However, it can be demanding work, and there's always a risk you'll lose money on a maintenance issue before you've made enough to cover the costs.
Pay Yourself First
If you have debts, your gut instinct may be to put all of your spare money toward paying it off. However, that's often not your best option. Instead, it would be best if you focused on paying yourself first — meaning, prioritize money toward your savings and investments before you go above and beyond on debts. The reason for this is simple: You can keep a solid credit score by simply staying on top of your debt payments. Going higher than that can help, but you'll get diminishing returns on how much. However, savings add up substantially over time, and you never know when you'll need them. It's better to have a credit card balance and an emergency fund when your car breaks down than no debt and an empty bank account.
Budget Your Money
One of the most common mistakes people make at any age when it comes to money is mindless spending. Many of us would like to spend less, but we have no idea where to start. That's where budgeting comes into play. By building and sticking to a budget, you won't just spend less; you'll start to get ideas for how you can do so strategically.
For example, you might start tracking your spending and notice that you put a lot of money toward restaurants each month. By boosting your grocery budget, you can cook at home more often. Over time, you'll notice that the extra you spend at the grocery store is still less than you would have spent picking up food otherwise.
Make Credit-Boosting Choices
Many young adults are afraid of credit cards. They've been warned their whole lives that credit cards are just a path toward uncontrollable debt and financial ruin. Although it's wise to be smart about credit card usage, having and using a credit card is the best and easiest way for a young person to build and maintain good credit. Once you have your monthly budget figured out, start using a credit card to pay for regular monthly expenses, such as groceries or your electric bill. Pay it off in full every month. Since it's money you were spending anyway, it shouldn't be hard to manage, and the process will give you a good, trustworthy credit score.
Your foray into the real world comes with lots of ups and downs, but money doesn't have to be part of your stressors. By taking control of your budget early on, you'll be ahead of the game. A strong credit score and great financial habits will be a boon your whole life long.