Financial Planning Basics: 8 Financial Tips for Young Adults

Financial independence can be tough as a young adult. While it may feel like you’ve been thrown into an ocean of money management without a life preserver, Florida Credit Union is here to help our members navigate the new waters to achieve financial success. If you’re not sure where to start your financial journey, we’ve created a list of our top eight tips that will help you on your way to smooth sailing.
 

1. Build a Budget

The key to reaching your destination of financial success is knowing where you’re starting and how you’re going to get there. That’s why it’s essential to build a budget that will act as a roadmap for your spending, saving, investing and financial goals. Creating a budget will help you assess your current finances and understand the way you spend your money and how you can manage your money well moving forward. We know this is easier said than done, but with countless budgeting apps available, it is easier than ever to customize a plan that works for you.
 

A good rule of thumb is to create a budget that follows the 50/30/20 rule. This means dividing your income into the following categories:

• Essentials (50%): Necessities like rent, insurance, food, utilities, transportation, etc.
• Wants (30%): Things you would like such as travel, eating out, entertainment and shopping.
• Savings (20%): Setting money aside for general savings, debt reduction, emergency funds and investments.

2. Prepare for Anything 

We have to expect the unexpected. While you may have a steady stream of income right now, there could be a time you find yourself without a job and in need of rent or grocery money while you look for a new one. Emergency funds are essential to helping you stay afloat when times are tough. As you start out, we suggest you work to save at least three to six months’ worth of living expenses to act as your safety net.
 

Part of your emergency fund savings should also include a rainy-day fund, or money set aside for unexpected expenses. These expenses may include buying a new tire after finding a nail in your old one or having to pay someone to fix the air conditioner that quit working in the middle of the night.

3. Start Saving for Retirement

We know what you’re thinking. Before you say, “But I’m only…” we encourage you to look at the long-term benefits of starting your retirement fund early. When you invest into your retirement fund now, you can earn compound interest over time, meaning your money is making more money the longer it stays in the account. If you start putting little sums into your account at a young age, it’s more impactful than putting larger amounts into the same account at a later age.

4. Diversify Your Income Streams

A.K.A find your next side hustle. If you’re having a hard time putting money away for savings, want to pay down your student loan debt or you just want to save up for a fun trip, consider picking up extra work to reach your financial goals. Examples of easy ways you can make money that are flexible to your schedule include:

• Freelancing
• Tutoring
• Blogging
• Food Delivery
• Driving Services
• Babysitting
• Dog-sitting

5. Take Care of Your Credit

If you ever want to apply for a loan or rent an apartment without a guarantor, you’re going to need a good credit score. Start building your credit now to ensure you aren’t held back by a poor score in the future. Ways you can do this include paying your bills on time, having only one credit card, taking on smart debt, only using 30% (or less) of your available credit and paying off high-interest debt first.

6. Learn How to File Your Taxes

If you file your taxes correctly, tax season can be an opportunity for you to earn back some of the money you paid in taxes throughout the year. This means making sure you file on time and claim any possible deductions. We know it can be tricky to figure out what counts toward your deductions or how to file your taxes in the first place, but online tools such as TurboTax and H&R Block help people of all ages file with ease.

7. Protect Your Assets

It’s important to be vigilant when it comes to building your savings and protecting what you’ve already earned. Inflation can chip away at your funds, so it may be a smart move to put your money in a high-interest savings account that will help you earn a little more over time.
 

To avoid unnecessary expenses and protect your wealth, make sure you’re enrolled in all the appropriate insurances. While paying for different insurances may seem like an extra expense coming out of your paycheck each month, you won’t miss the small sum if disaster strikes and your policy has you covered.
 

8. Don’t Fall into the Social Media Trap

We’ve all seen social media posts about amazing trips and clothing hauls, but what you don’t see is the toll of unnecessary debt that doesn’t make it on to your feed. While it may feel like you’re falling behind, the only way to truly elevate your financial status and pave the way for a successful future is to focus on saving and budgeting.
 

While it’s easy to feel like you’re in over your head as you try to make sense of your personal finances, FCU is here to bring you simple solutions with powerful technology so you can enter your new chapter with confidence. To learn more about financial literacy and what the credit union difference looks like, visit our website and start your journey today.