If you’re in your late teens or early 20s, you may not know much about personal finance. Even if your parents made an effort to teach you, there may have been things they didn’t know as much about either. Even if they were as thorough and diligent as possible, you probably lack the experience to always make the best decisions. Below are some of the most important things you should know at this particular time.
Living Within Your Means
With many personal finance tips being offered, if there’s only one thing that you need to remember, it’s that you should live within your means. In other words, don’t spend more than you have coming in. There’s a corollary to this, which is that if you are finding yourself struggling to make ends meet, you need to do one of two things: cut expenses or increase your income. As sensible as these points may be, it can be hard to figure out how to implement them. The rest of this article will explain how you can do that.
Paying for School
Should you get a college degree? For most, a degree ensures a higher lifetime income, meaning that this will help you with the increase income mentioned above. Even if you’re hoping to work in a trade, which pays well but doesn’t require a degree, college can be helpful in helping you learn how to run your own business or with other skills. Some people wonder whether college is worth it because of the expense. However, you don’t have to pay the entire amount for college. You can search online for college scholarships. There are many different opportunities, ranging from large to small amounts. You should create a plan for applying for a number of different ones to increase the likelihood of getting an award.
Making a Budget
A budget is critical in ensuring that you are able to live within your means. However, there are a few common errors people make when it comes to budgeting. One is not really understanding where their money is going. Apps that track your spending can help you determine this. Another is failing to account for occasional expenses, such as presents, haircuts, laundry detergent, or vacations. Yet another is creating a budget that is so restrictive that you can’t stick to it. Your budget should be thorough and disciplined, but it should also allow room for you to have fun.
Why a Retirement Fund Matters
Another big mistake that young adults often make is thinking that they don’t need to contribute to their retirement account. Maybe retirement seems like it’s a long way off and the money could better be spent elsewhere. The problem with this line of thinking is that you will never be in a position for your retirement savings to grow in value as when you are in your 20s. By the time you retire, that money will be worth many times over its original value, even after you account for inflation. Therefore, you should try to boost your retirement fund and prioritize putting money away for retirement as early as in your first job.