5 Smart Money Management Tips for Young Adults

While it’s quite unfortunate that schools don’t teach money management anymore, this doesn’t change the fact that there comes a time in every person’s life when learning how to handle finances is a must. However, many fail to understand that managing your own money isn’t just about setting up a monthly budget. If you want to approach the subject of money management properly and set yourself up for success, you should understand that it will not only enable you to save money but also pay off debts (or avoid them entirely) or start making investments.

In this article, you will find a short guide to personal finances management and keeping your money in order. The tips range from automating your savings to developing a budget and creating an emergency fund for unexpected expenses, among others. Read on to learn more, and soon, you should see yourself managing your money in a smart way.

Monetize Your Hobby for an Additional Source of Income

Thanks to the internet, monetizing your hobbies has never been easier. You don’t have to make a career out of it, but you can turn something you enjoy into a small income stream that can help pay for things like new equipment, toys, or travels, or add up to your savings account.

If you like video or online games, for example, and can’t get enough of them, consider making money on the side by participating in free-to-play tournaments, playing VIP games for money, or perhaps by setting up a YouTube channel where you can teach others how to beat difficult levels. Are you a sports fan? If so, you can make some extra cash by betting on your favorite team or becoming a sports analyst.

Hate sports? Then monetize your love for books by providing reviews, or if food is your thing, start a blog that features useful cooking tips and recipes. The opportunities are endless, as long as you love what you do. Monetizing a hobby is an excellent way to make some extra cash without having to quit your day job.

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Create a Budget and Stick to It

One of the most important rules of personal finance management is learning how to set up a realistic monthly budget. While it may sound easy, many people tend to get lost along the way because they either don’t approach the task correctly or tend to overestimate how much they can afford to spend. As a result, even with a budget in place, they might end up spending more than they earn.

A good budget will help you pay all your bills on time and ensure that your income exceeds your expenses. To do so, identify your fixed monthly expenses (mortgage or rent, car payments, etc.) and then add up all your variable monthly expenses (utilities, groceries, entertainment, etc.). You might also need to budget for things like clothing – this will help you keep track of the seasonal clothes you buy and get a better understanding of which items are essential and which aren’t. If something isn’t essential, buy it once you manage to save enough money instead of making a splurge and taking a chunk of money straight out of your budget.

To write your budget plan down, you can create a spreadsheet in Microsoft Excel or use apps like Mint, PocketGuard, or YNAB. Try them separately or combined to see what works the best for you.

Have an Emergency Fund

Having an emergency fund is one of the most important parts of personal finance planning. Why? Because unexpected things do happen, and you certainly don’t want to be left without literally any money at all. Having enough cash in your emergency fund will help you deal with unexpected car or home repairs, large medical bills, or even emergency trips back home from vacation.

Regarding the amount of money you should keep in your emergency fund, financial experts recommend keeping enough cash to cover 3-6 months of living expenses. It means that if you make $4000 monthly, you should have $12,000 – $24,000 saved up, but don’t worry if you’re nowhere near this amount or simply don’t think you can save this much. The most important thing is that you start putting money aside, and you should do this sooner than later.

Right now, you can try to make saving for the emergency fund an integral part of your monthly budget. You can also choose to save around 10% of each paycheck. Last but not least, don’t wait to save for emergencies until you reach another financial goal, for instance, until you pay off your loans. Start saving now – the sooner, the better.

Pay Off Student Loans

The numbers say it all – about 46 million Americans have student loan debt, meaning that these loans are one of the most significant financial issues you might face as an adult when trying to manage your money. While there’s no one-size-fits-all solution and everything depends on your individual situation, here’s what you can try to do:

  • Each month, try to pay back more than your loan actually requires. If your monthly budget allows it, this might help you pay off your loan in a much shorter time.
  • If you have multiple loans, try first to pay off the most significant one or the one with the biggest interest rate.
  • Refinance if you have a good credit score and a steady job.
  • If your loan overwhelmed both you and your financial abilities, consider applying for loan forgiveness.
  • Whenever possible, try paying off the smallest loans in full.

Automate Your Savings

Once you’ve set up a budget and a reasonable monthly savings plan, you should automate it. This means that once you receive your paycheck, the amount that you’ve planned to save will be automatically transferred from your bank account to your savings account. This way, instead of spending the money you’ve earned on non-essentials, you’ll keep it safe.

Automating your savings is a perfect way to save money without even noticing it. As a result, whenever you’re faced with unexpected expenses, you can head straight to your savings account and use the money you have automatically put aside without doing any harm to your monthly budget. This approach can also help you save for big financial goals, such as buying a car or going on vacation.

In Conclusion

To sum up, learning how to stay on top of your personal finances isn’t as hard as it might seem, and there are ways to avoid all the common mistakes that people trying to save money make. The key to success lies in building a budget you can stick to, having an emergency fund in place, making sure to pay off your loans, and taking advantage of the possibility to automate your savings.

Handling your own finances is a crucial skill you should master as an adult, but try to keep in mind that nobody’s perfect, and there’s no reason to beat yourself up if, currently, you’ve got money issues. If you learn how to make them a thing of the past and follow the tips above, there’s no reason why you shouldn’t become financially fluent.

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