Simplifying Finances

5 Simple Steps That Can Simplify Finances for Younger Adults

If you’re just starting out in life, your major concerns may not include money just yet. If, however, you want to avoid one of the leading causes of stress for many Americans, you really should be more concerned about your finances. That means taking some time to understand the choices that can help you achieve and maintain financial independence, and stay prepared for all the milestones or challenges that are ahead of you. To make this learning process easier, we’ve broken those choices into those that will impact your future and those that affect your present.

Planning for Your Financial Future

Get Life Insurance Coverage

When you’re young, the last thing on your mind is the end of your life, but if you really want to get serious about finances, you have to be willing to think about these kinds of serious topics. That’s because, depending on your current lifestyle and situation, different life insurance policies may offer more financial protection for your loved ones, should the unthinkable happen to you. Although many of these will not apply to young adults just starting out in life, it helps to know that a 20-year policy can be beneficial for those who have children, a tight budget, considerable debt, or a 20-year home mortgage. Buying life insurance young can have other benefits too, including lower premiums and increased cash value that can become useful later in life. When applying for life insurance, know that you will likely be required to take a blood test and possibly an exam. This ensures the insurance company can charge the ideal rate.

Start Saving for Retirement

Most young adults avoid thinking about their senior years as well, but that can be a huge financial misstep, especially considering that most American seniors will not have enough saved to comfortably retire in their golden years. Even if you begin saving in your mid-20s, you would still need to put away up to 17 percent of your annual income to even consider retiring in your 60s. You can offset this financial burden, and ensure you won’t have to work longer than needed, by being proactive with your retirement savings.

Put Away Money for a Home

Many young adults, including millennials, are renting homes instead of buying. While the reasons for this housing trend vary, the upfront expenses involved with buying a home can often deter people from homeownership. This doesn’t have to be the case for you, though, so long as you make saving for a down payment one of your top financial goals; in fact, many people begin to save for a down payment long before they start the homebuying process. If you begin saving later, you will likely need to make more sacrifices in order to save the amount needed for a down payment, but getting an early start can help you avoid sacrifices. 

Protecting Your Finances Now

Create and Use a Clear Budget

Personal budgets help create healthy finances, but most young adults are not sure where to start. If you need help creating your budget, you can find budgeting tips online that can guide you through the process of mapping out your income and expenses, as well as any financial goals (like the ones above). You have to stick to the budget in order to see benefits, so consider using a budgeting app for helpful reminders and savings tips.

Manage and Use Credit with Care

There’s more to managing your finances than balancing a bank account: you also need to know how to use credit. This is a concept many older adults still don’t fully understand but you can use online credit guides to help you gain control of your credit habits from the very beginning. You can start building good credit by applying for your own card or becoming an authorized user on someone else’s account, but the most important things to remember are the basics, like credit usage and payment history, which have the most significant impact on your credit score.

Whether you just graduated high school or college or landed your first full-time job, caring for your finances now will guarantee a happier future. By establishing smart spending habits, wise credit usage, and proper financial planning, you can set yourself up for anything life decides to throw at you in the years ahead. Take these steps now so you can worry less later.

Article by: Christopher Haymon (christopher@auditingdigest.com)

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