When it comes to money, the beauty of being young is that time is on your side.
You may not have much money. You may not know what your financial future holds. That’s okay. You have the benefit of time.
Time to set achievable goals. Time to plan. Time to save. And, time to learn the following money lessons that could spare you a lot of personal and financial frustration in the future:
1. Believe in the power of a budget. It cannot hurt you to know where your income flies every month. Track it carefully. Many young people find themselves overextended because they just assume, or hope, they have enough to meet their needs.
Get real about how far your paycheck goes sooner, rather than later. A budget keeps you in the financial driver’s seat. Exactly where you need to be from the start.
2. Spend well. Your budget is a good way to track your spending, but it’s still easy to get off track, if you never really got a handle on your spending priorities. Establish early a proper balance of expenses.
Needs come first. Address your “wants” when you’ve lived with a budget for a while. See what you can afford after fleshing out a savings plan that will provide more significant wants and needs further down the road.
3. Save now. Post-recession personal finance understands the importance of those two little words. Don’t ignore them. Tell your friends. Save now, and save your future self a lot of stress.
Seriously, it’s vital that you set aside a portion of each paycheck to see exponential growth in your retirement savings. You can’t wait until you’re 40 to benefit fully. Use the money you’re making now to secure your future, even if you feel you aren’t making enough to matter.
Love on your 401(k). A bit of discipline now will definitely pay off.
4. Plan for the life you want. What do you want out of life? Marriage? Kids? Travel? How much do you think that’ll cost?
Many people just fall into life’s milestones, financially ill-prepared, spending years trying to recover. Things can get pretty tight, and relationships can get strained.
Don’t go down that road. Instead, plot a clear financial path with the help of a financial planner, who can help you see and save for what’s coming.
5. Plan for the unplanned. Rainy day savings, an emergency cash stash, or a contingency fund…whatever you call it, it’s a wise move.
When tough times come, having cash on hand is the best feeling. Simply have money directly deposited every pay period. Make it a habit to grow your dedicated savings fund as your income grows. You’ll thank yourself again and again.
6. Kill debt quickly. Finally, understand and believe with all your heart in the goal of debt-free living. A 2009 Sallie Mae study reported the average undergraduate student carries $3,000 in consumer debt, and leaves school owing nearly $20,000 in student loans!
The credit cards companies do not really love you. You don’t need their approval. Student loans can hold you back for decades.
Begin a debt payoff schedule today. Debt is financial slavery. Fight to stay free.
7. Pay your lifestyle dues. Keep in mind that your mom and dad weren’t always your mom and dad. The home you grew up in, or the cars they currently drive, is a result of the financial state they worked their way through years ago.
You needn’t compare their well-established financial apples to your 20-something oranges.
Work your way up. Save well. Remember, you have time.
Denise Kautzer is a Licensed Professional Clinical Counselor and a Certified Public Accountant whose practice is located in St. Paul, MN. You can view her website at www.denisekautzer.com or contact her at denise@denisekautzer.com.