You may struggle with financial planning as a young adult, especially if you lack adequate financial education and understanding. That, alongside the fact that you may have just started earning and are struggling with student debt, can make for an unpleasant situation. However, although you may not reach your peak earnings until years later when you’re in your forties or fifties, it wouldn’t hurt to learn about better financial planning and money management early.
This lays a good foundation and helps you make more sound financial decisions to help you now and later in life. If you’re looking for ways to improve your financial planning but don’t know how to do so, this article shares five top tips that may benefit you.
1. Go for professional financial planning advice
You may feel like it’s not a priority to engage with a financial planner just yet, but financial matters should always be prioritized no matter what age you are. It would benefit you to tackle these things early and get the best guidance and directions to support you through life. Even the best financial planning books may not provide all the answers. Working with a certified and reputable financial planner is the surest way to help set you on the right track to plan and manage your money successfully.
In the same way you rely on professional services for other matters, such as health and education, you should consider consulting a professional for your finances. Research, evaluate, and learn more about financial planners and their services before you engage with them.
2. Create an emergency fund
Unexpected expenses are among the biggest culprits that put people deep in debt. If you start accumulating debts this early in life, it might be challenging to get out of them in the future. And while you may not be able to predict when you’ll be faced with an emergency, you can still adequately prepare for it.
One of the best ways to deal with a financial emergency and the consequences that may arise from it is to create an emergency fund. It would be wise to set aside a certain amount every month to put into an emergency fund that you can access anytime life throws an unexpected curveball your way. Experts recommend having at least six months’ worth of living expenses in your emergency fund.
3. Make a proper budget
To help you reach your financial goals, you need a budget. You need to know how much money is coming in and what you’re spending it on. To achieve this, you should start tracking your income and expenditures so you can come up with reliable figures to work with.
Fortunately, technology has made it easier to track your spending even while on the go, with tracking applications and software. Budgeting books explain that when you track all your expenses and the things you spend on, it becomes easier to eliminate unnecessary costs and create a working budget. You need to have short- and long-term budgeting goals, and it’s important to review them often to ensure they match your current financial status.
4. Start retirement planning
Though it might seem a long way off, start thinking about retirement savings as soon as you begin earning money. If you’re working for an employer that offers a retirement plan, sign up for it. If your workplace has no such plan, seek guidance from a financial planner on how to effectively save for retirement. This is one of the best ways to prepare for your future, as retirement is an expected eventuality.
The sooner you start setting aside funds for your retirement, the better off you’ll be. You may not be able to afford to contribute significant amounts in the beginning, but you’ll be getting into a good habit of saving and preparing for a soft landing in the future. Thus, it’s best to set up a retirement fund when you’re young so you can start building your wealth with less worry.
5. Get into debt the right way
You may be wary and reluctant to get into any kind of debt, but you need to understand that not all debt is bad. You can use some types of debt to achieve your financial goals if you approach them strategically. Besides, you may be required to take out loans to pay for education, a house, a car, or other investments.
Furthermore, responsible debt can help you build your credit score, which affects your future ability to get financing. Avoid taking debt that you can’t handle or one that puts you in financial difficulty. Also, pay back your debts promptly to avoid incurring high interest and penalties. The important thing is to understand how much the debt is costing you.
Financial planning is something you can start at any stage of your life. It helps you get into the habit of being wise with your spending, budgeting, savings, investment, and the growth of your wealth. Whether you’ve just finished college, are on your first job, or are simply trying to be smart with your money, understanding your finances will set you on the right path to financial success. Visit a financial planner if you don’t know where to start.