Budgeting tips for young adults

Make a budget

As a young adult, there are many things competing for your money such as food, bills, gas, car insurance and student loans. The best way to prioritize is to establish a budget. Try sticking to the 50-30-20 rule as best as possible: allot 50 percent of income to fixed living costs, 30 percent to fun stuff and 20 percent to pay off debt, save for retirement and invest. If you are a young adult still living at home, you may not have a large amount of fixed costs so allocate a greater majority of your income to investing and saving.

Use credit cards wisely

It is easier to swipe your credit cards rather than pay with cash because you don’t see the money physical leave your hands. This can be dangerous. If you hastily use your credit card to pay for everything, you may spend more than you can pay off in the future and consequently fall into debt. Additionally, it is important to minimize credit card usage so you’ll have the ability to pay off credit card bills in a timely manner. Paying off these bills will allow you to create good credit, which is vital for the future.

Practice self-control

To save as much money as possible, you’ll need financial discipline. Try to only buy things that you need instead of just want. For example, if you want a Starbucks Grande Caramel Frappuccino every day at work, you’ll spend an estimated $85 a month and a little over $1,000 a year just for coffee! By cutting back to every other day or by buying a smaller size, you’ll give yourself an opportunity to save.

Start saving for retirement

Yes, it may seem impractical for young adults to start saving for their retirement years but it will pay off in the long term. Because of compound interest, the sooner you start saving for retirement the more you’ll be able to grow your financial nest egg. Your employer may be able to help, too. When choosing a job, look for companies that offer employer-sponsored retirement programs such as a 401(k).

Solid management of your personal finances as young adults will provide you with greater financial opportunities later in life. Travis Credit Union can help you get started on that path. Our upcoming Mad City Money seminar can teach you financial skills that you’ll use for life. To learn more and sign up, visit our Free Seminar Calendar.

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