Too many young people enter adulthood without really understanding how the financial world works. Their high school courses may have introduced bill pay schedules and maybe even budgeting, but when it comes to borrowing and investing, some new college students know little to nothing on the subject.
However, the best time to lay the financial groundwork for a lifetime of saving and investing is before the age of 25! If you fit into this category, take a look at five financial tips you should begin practicing now.
1. Begin Saving for Your Future
After meeting your basic living expenses, put some money into savings. You may not have a lot of extra cash at first, but developing this habit early is a good way to be sure you’ll have money to fall back on when necessary. Establish more than one savings account, so you have an emergency fund, vacation money, and long-term investments.
At this point, you should also write out your financial goals. Maybe you want to pay off some college debt or save up for a house. Keep your goal in sight visually and mindfully to remain dedicated to your plan. Make sure you invest in yourself as you prepare for the future; an education or specific training could improve your financial future.
2. Track Your Spending
An effective budget requires a close look at where your money is going. Keep track of how much money you make and account for every penny you spend. Those daily stops at the newsstand and the coffee shop add up quickly. By tracking your spending, you can identify areas of waste and over-spending. Visual proof of your spending habits also helps you think more carefully before you spend. Remember: A budget is only as effective as your awareness of your incoming and outgoing money.
3. Choose a Financial Mentor
It can be hard to decide how much of your money should go into investments or which investments are best for your situation. Figuring out the best returns for your investments can also be challenging. An experienced and successful investor is a good choice for a financial mentor. Choose someone you trust and can be honest with because you need to share all of your financial ups and downs.
4. Diversify Your Investments With Specific Goals
The saying goes, “Money is a good servant but a bad master.” The same is true of interest. You can either use it to your financial advantage or find yourself slaving away to pay it off. From the start, avoid debt and put your money into investments. This way you avoid paying interest, and you make money by accruing interest. Another quote presents this another way: “How to have your cake and eat it: Lend it out at interest.”
5. Look for Multiple Ways to Make Money
One financial whiz reports that a typical millionaire has seven different sources of income. You may consider getting a second job, researching investing for beginners, starting up a side gig, or choosing assets with a passive income.
It’s never too early to start saving for retirement, and now is the time to take control of your finances. By following these five tips, you’ll be on the right path for enjoying security and comfort for many years to come.