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Financial Advice For Young Adults – It Can Mean Millions
Not every young person has a parent that has the financial savvy and knowhow to get them on track to a stable financial future. With that said, preparing for a better future is easier than you might think. People that start wisely managing their finances at a young age (eighteen is ideal) and investing in the market have a very real chance to become a net worth millionaire by retirement. The sooner you start, the better off you are.
This article won’t explicitly cover the math behind how one can (eventually) become a millionaire off of investments and compound interest (that’s another post for another day). But it will help you get started with some best practices for making the most of your money and planning for the future. Read on for my top five financial tips for young adults
It’s Never too Soon to Start Planning for Retirement
I wish that someone would have sat me down at a young age and explained to me how money works and that those that start saving young can set themselves up for future success by investing small amounts each month for the long term. I missed some valuable and didn’t start investing until my thirties but that doesn’t mean that you have to make the same mistake.
Time is of the essence when it comes to investing. Compound interest is the equivalent of free money. But you can’t enjoy that kind of passive income until you start setting aside a chunk of your monthly earnings and putting those funds to work!
Start Establishing Credit History
In the event you’d like to purchase a home or car, you may need a loan. And in order to get approved for one, you’ll likely need established credit history. Credit cards can be a good way to prove that you are fiscally responsible. But be careful to avoid the temptation to live outside your means. And read our Guide To Establishing Great Credit.
And don’t forget our our article How To Maintain a High Credit Score.
Make it a Point to Pay off Your Credit Card Balances Monthly
If you don’t pay off your card(s) at the end of each month, you will pay interest to the financial institution(s) that issued your card(s). This can easily lead to a vicious cycle that makes it feel next to impossible to get out of debt. Not to mention that the money you are paying in interest could be invested in the market or placed in an emergency fund. More on the importance of an emergency fund in a moment.
Start a Budget
One of the pivotal building blocks for financial well-being is a budget. I’ve written an entire post on how to establish and implement a budget (you can see that here). But for today’s purposes, I will just say that planning where every cent of you net income will force you to take note of where your money is going and allow you to make it work for you more efficiently. With that said, budgeting isn’t always easy and it takes practice. But I can promise that if you put in the work, you will start to see your money stretch further than you realized was possible.
Create an Emergency Fund
The last piece of advice I have for you is to create an emergency fund. The unexpected is the enemy of any budget. But if you plan ahead and save for the unforeseen, you can keep that unplanned visit to the emergency room or car repair from derailing your progress. If you would like more information, check out our Guide To Creating an Emergency Fund.
With the five steps outlined above, you should be well on your way to financial stability. Of course, an absolute must is to sign up for our newsletter so we can show you how to retire as a millionaire, even if you can only save $10 a month. Can you save more? We’ll show you have to retire years, if not decades earlier. Youth is the one advantage in finances older people can’t change. Knowledge is power. Let us show you.
What Financial Tips Did You Learn at a Younger Age?
