As a young person, it can be a daunting task trying to determine the best practices for a young adult to set themselves up financially for the future. Let’s look at some of the things you can do to get on the right track.
Watch what you spend – Regardless of what you earn, if you spend it all, or you spend more than you earn, you are always going to be poor. It’s easy to find yourself seduced into purchasing whatever you want rather than just what you need. For you to enjoy financial success, you must defer gratification and live within your means. There is no other way. It is wise for you to keep track of your spending for a week or month, so you have a good idea where your money goes. Making small ordinary changes in your expenses is a way to free up your cash and then you can use it to build your financial security.
First pay yourself - Your most important priority is your financial savings. You need to determine your personal expenditure budget – groceries, rent, socializing, travel, etc. There is no need for you to live like a pauper while you pursue your distant future; however, just change your mindset so that you put the priority on your regular savings. Think of it like your financial workout, where you begin small and gradually increase what you are saving.
Debt is the devil – You can use debt responsibly which will allow you to purchase things today that you actually need, such as your home, but which you could not buy outright if you had to. When you borrow money, you should always keep in mind the interest rate and the length of time to pay it back (the term) as this will have a direct impact on your ability to repay the loan. Right now with low interest rates, mortgaging a home looks very enticing, but you have to remember that interest rates will go up and you need to still be able to comfortably pay your mortgage, so don’t over extend. Also don’t use debt (credit) to buy things you don’t need. Credit cards are dangerous when not used properly.