Although personal finance is a very important subject for life, you don’t get to see it in most of the syllabus, around the colleges, or even in universities. Since there is a very thin presence of personal finance in young adults, most of them are clueless about how to manage their money, track their expenses, and things related to finance. Lucky are those whose parents teach them at an early stage, but for those who have no idea, it’s not too late to learn about it. Most of the personal finance tips are learnt through the journey of life itself but we can’t deny the fact that learning these tips beforehand in order to get rid of the unprecedented problem and minimize the possible risks with proper decision making is very important.
So, let’s jump to five personal finance tips that will help you shape your financial journey while you are still young.
While you are young, it’s the perfect time to learn about your money. By learning about money, also get used to tracking your monetary expenses. Know your income sources, your expenses, your bills, your savings.
The best thing is to get a money tracker app and track your money on a daily expense. This will give you the habit of tracking income and expenses, budgeting, and allocating your finances wisely.
Yeah, you heard that right. You should start thinking about what you plan to do in the future or now with your money. We agree, there isn’t much left from your paycheque while you are a young adult. But, start investing with any amounts that stay from your paycheque.
There are multiple ways that one can save some money and help it grow for the future. Start with investing in stocks, cryptocurrencies, futures, fixed deposits, and many more. It’s on you if you want to learn about investing, trading, or follow a professional. Choices are you can start asking someone close to you, to teach the basics. A friend, family member, or neighbor there is pretty good chances you will come across someone who knows that stuff.
You will find the “ emergency fund” in almost every financial tip you get or read. It’s one of the financial mantras to better financial freedom and security. So, the first thing before all investing is to save it for yourself, in case of any emergencies. You may have your college dues, or some loans to pay off. Unless it charges interest and you have spare money to pay them, save money for yourself.
A situation like the pandemic, where you can be jobless without having a proper source of income may come again, so it’s better if you have some emergency funds with you. Also, the best thing about an emergency fund is, once you start saving it, you will get to a point where it will be more than just an emergency fund, but also have funds for vacation, and holiday trips.
Normally, the principal for saving your emergency fund is calculating your basic expenses up to six months and saving them. Basic expenses include your loans, fixed expenses which you have to pay like EMI, tuition fee or mortgage fee, and some amount with which you can manage to live.
Money works mysteriously in the long term while compounding does its magic. The earlier you start saving for retirement, the big amount you will achieve in your retirement. Maybe you have a dream to get your own home, own a car, or own a business, you will get your sum for those if you start saving early.
If you begin saving in your early twenties and age slowly like a fine wine, you will have enough money to make working an option rather than a necessity. For a glimpse of the mathematical figures of your savings, you can use easy online calculators, like SavingsCalculator.org. This allows you to rapidly calculate how much money you will have saved over a certain investing period.
Also, for better saving options, use your company-sponsored retirement plans, where you can save on taxes as well.
Once you start working, you will find taxes on almost everything. So, it is very essential to understand how money works, how tax works, and how to deal with them like a smart person. Firstly, clarify all the doubts regarding taxes from your office. People from the Human Resources or Finance department can help you out with that.
After you clear your taxes, learn new things like, what percentage is an average tax in your state, and how much you will get after taxes from your annual salary. Things like this, may not look important, but it will help you out setting monthly budgeting goals, while you are living through your paycheque.
Some companies even have policies regarding saving taxes, which you can contact your office for more information.
It’s not necessary to have a top-notch degree in MBA or in economics to manage your finances. Sometimes, a blog like this and personal finance tips on youtube will teach you a lot more than three years in some courses. So, follow these 5 principles and you will be a step closer to achieving your financial freedom.