You are almost 18 or perhaps already 18 or older. You have just started exploring various things in life such as finance. Perchance, you are already working in a part-time or full-time job! Congrats!! But you ought to know how to manage your capital rather than squandering it away.
Putting the money in the bank is great but there is more to it. This is a great time to build good financial habits. No individual can be too young to understand what money is and what financial goals are.
1. Maintain a proper budget
Spend lesser than you earn. Save more. Keep track of your earnings, expenditure and savings. How do you do that? Gandharva is a 25-year-old man who has just begun earning. He prefers to keep track of his savings by listing it on a paper using a pen. Mahima is a 25-year-old woman who has just begun earning. She prefers to keep track of her savings by using apps and Excel spreadsheets. There is no right or wrong way. Both methods are fine as long as it helps you. Many people live at home even after they begin working so they don’t have to pay rent and such other things. But other costs are still there. A budget will ensure you keep track of your income and expenditure and know how much you can save.
2. Establish pragmatic targets
You have many goals, some are huge and some aren’t huge. But your goals must be practical. Say you want to travel to Hawaii within 2 years. That’s great but you also need to start saving for the same. On the other hand, saying that you want to go to Hawaii in the next 5 months while you are still struggling with student debt is an unrealistic goal. Even after saving for two years for your Hawaii trip if you aren’t able to save, don’t discard the plan. Instead, check what went wrong. You may have squandered away some money either knowingly or unknowingly. Refer to your plan and verify. Then make suitable changes in it. How much money you spend on food, shelter, clothing, basic accessories, rent, and so on is very crucial in determining how much you can save.
3. Enlighten yourself more about finance
Financial literacy is essential for every individual. Unfortunately, not many schools teach us to finance related subjects. You have to learn them all yourself. Once you know the basics, don’t stop there. Go ahead and learn more about saving and investing. When you learn to invest in the stock market, you will know to save for an emergency, college education of your kids, your retirement (why should you save for retirement?) and so on. Networking is also crucial here. Talk to people you know. Ask them what blunders they committed that they don’t want you to commit. Talk to your older cousins and siblings, your parents and older relatives, your neighbours and friends.
4. Verify your budget each month
Hansraj is a young man who got married recently. When he checked his budget he was taken aback! His budget had changed! That’s because his expenses before marriage differed from his expenses after marriage! Major changes had occurred! A wedding is a major life event, after all! Frequently check your budget because even a minor life event can affect your budget. It can change on a monthly basis and you never know until you check! If Hansraj never checked his budget, he would never be aware of the changes in his budget and would possibly wonder why he isn’t able to save as much as he used to save earlier.
5. Keep all bills together and pay them regularly
Maintain all your bills in one place and keep track of them. Ensure that all of them are paid regularly. You don’t want to pay penalty for late payments! Pay bills early or on time. To do this, you have to keep all the bills in one place neatly organized. I would suggest you maintain a file where you can store your bills.
6. Keep an emergency account
Unforeseen disasters can occur anytime. You never know what will happen next. You may suddenly find yourself at the exit door of your office for eternity, or get involved in an accident and be hospitalized. You require money for all that. Hence, maintain an emergency account that will be handy for you in times of need.
7. Save for retirement
It’s too early to think of retirement, but this is the best time for it! You have more time and more risk-bearing capacity than you will ever have. Every drop of water contributes to the ocean. You can dedicate small amounts of money for your retirement as the years pass by. Your old self will thank you for this.
As a young adult, these are the ways you can ensure your financial life is settled.
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