Have you ever wondered how people afford so many luxuries? How do they even have the money to spend on those things? For most young adults, these are questions they probably haven’t stopped asking since childhood. According to a recent study by the Financial Industry Regulatory Authority and Bank of America Merrill Lynch, over 80% of Americans between 18 and 29 years old have less than 10K in savings and about half of them have less than 1K.
That’s not surprising though, is it? With school expenses, car repayments, cell phone bills, rent payments, utilities and all other fixed expenses piling up every month, saving money has become almost mandatory for everyone. Fortunately, there are ways young adults can start thinking differently about money from this point onward.
It doesn’t matter if you’re a broke college freshman or just starting your first job after college; it’s never too early to build an upward change in your financial habits as long as you know what you’re doing. Here are 6 practical tips that every young adult should consider sooner rather than later:
Pay yourself first
Another way to think about your money differently is to put what you earn back into your pocket. This is a common practice among young people. A recent study found that 37% of millennials admitted to spending what they had in their bank account. It’s not surprising this happens though, is it? Since most young adults are still establishing their careers, they rarely have enough income to cover the expenses associated with living a decent life.
They might be tempted to spend what they have so they can have a little more. But why make this a permanent habit? When you get used to spending what you have, it can become incredibly hard to change back.
Therefore it’s crucial to get yourself out of this pattern as soon as you can. Put whatever money you have in your wallet into your savings account and start taking small amounts every single week and month and watch it grow. You’ll be surprised at how fast it can add up.
Keep a budget
Every month, write down every single expense you have. Put them in a budget spreadsheet or, if you’re more comfortable with pen and paper, just write them down. This way, you’ll be able to see where your money is going and what you can do to cut down on unnecessary expenses. It’s important to keep a budget because it forces you to think differently about your money.
Instead of letting yourself go on spending sprees now and then, you’ll be forced to be more aware of how much you’re spending. This will help you get a better understanding of your finances and, eventually, you’ll be able to cut down on unnecessary expenditures.
Don’t compare your money with others
To realize is that software engineering is one of the best ways to build wealth early. Many people who have started their businesses in the tech industry have done so by learning to code. If you’re interested in this field and think it might be something you’d like to pursue in the future, take some time to enrol in a coding class. This will not only help you learn to code but also get you comfortable to build a business from scratch.
You can also look into hiring a programmer as an employee. If you’re anything like me, you might think that hiring a team of people to help you code is over the top. But if you take the time to learn how it works and how coding works, you can easily end up saving a ton of money in the long run.
Be happy with what you have
The best way to change your money mindset as a young adult is to change your mindset about things you don’t have. Many people in their early twenties are so focused on what they don’t have that they forget to be happy about what they have. It’s important to remember that money is not the end goal in life. It’s just a tool that can help you achieve your goals.
When you think this way, you’ll start appreciating what you have a lot more. You’ll spend a lot less time comparing yourself to others and you’ll be a lot happier with what you have in life. This might sound like common sense, but it’s amazing how many people forget this truth.
Bottom line
There’s no shame in having a limited amount of money in your savings account. This is exactly where most people build wealth. The secret is to think of money as something that can be transformed from one thing to another. It, therefore, follows that the best way to transform money is to think differently. This can be done with the aforementioned tips and knowing how to manage your money and diversify your investments.
