Managing your money can be hard, especially if you’re in your 20’s. Figuring out a workable budget, whether you are a college student, buying your first apartment, or in debt, is not only a good idea for your finances-in many cases it’s an absolute necessity. Want to know how to maximize your cash without being overwhelmed? Here’s 7 simple tips to help you manage your next pay day and beyond!
1. Spend According To Your Needs, Not Your Paycheck
For most Americans, they are one paycheck away from destitution even though they are paid well or hold two jobs. Why is this trend so common? They spend what they have, instead of what they need. Especially when you just start out in a new place or in a new profession, your lifestyle can turn expensive very quickly. A car, professional attire for your job, a deposit on an apartment, or furnishings for your new home can add up in a short amount of time.
How do you make it easier to manage your money in these times? By spending what you need instead of what you have. Liz Pulliam Weston, author of ‘The 10 Commandments of Money” explains that living scarcely and having the bare minimum after you get a new job or place is one of the best ways to get a hand on your new expenses and save money at the same time.
2. Returning Home Instead
Although most people just out of high school are eager to get a taste of independence and leave the family home, studies show that around 85% of new grads return to living with their parents within the first two years after high school. For most young adults, this is the first experience they have with the job market and managing their money. Consider these four benefits that living at home offers:
- Financial Flexibility
- Minimal Expenses
- Time to Create a Budget Without Real-World Pressures
- Opportunity to Save Money
3. Credit Cards: Make Them Work For You
Debt, especially from credit cards, can add up to monstrous proportions after college, a time when not only do expenses skyrocket but your salary remains the same. Riddled with high interest rates and expensive late fees, credit cards are considered big no-no for people in the beginning stages of managing their money. However, what if you want to raise your credit store and lower those interest rates? With 75% of the currency in the United States being in the form of credit, having a credit card can not only be useful but also help you make the most out of your financial situation if kept tightly reined. Here’s some guidelines on how:
- Spend A Small Amount Each Month, No Higher Than $20
- Add Your Credit Card Payment Into Your Budget
- Save It For Actual Emergencies
4. Paying Off Your Debt
If you’re in college, you know all about being in debt. Credit cards and student loans are easy to get for the person just starting out–and hard to pay off. If you owe money on several credit cards, CEO Bill Hardekopf recommends tackling the lowest limit first. Not only will it be less money to pay at once, but it will help keep the damage to your credit rating from being quite so devastating.
Stuck with student loans and no cash to pay them off all at once? Unless they have extremely high interest, try to make on-time, steady payments each month to chip away at the overhead while you’re still in college.
5. Build a Nest Egg
Having extra money for a rainy day or unexpected expense is a smart way to manage your money. Weston suggests having a ‘cash cushion’ of at least $500 at any point in time. This is enough to cover unexpectedly high bills, car repairs, or even hospital visits. Setting aside 6 months’ worth of expenses coincides with a flexible time-line that takes into account your expenses and is easily accomplished by adding a small amount of money to your savings each month.
6. Insuring Your Health
Having insurance is not just a smart idea, it’s a necessity for managing your money! Having health insurance or rental insurance guarantees that if you have a major problem with your physical health or living area that you won’t be the one shelling big bucks. Although it might seem counter-intuitive to spend your hard-earned dollars on something you might not use anytime soon, the modest payments add up for the day when you will really need them.
7. Have Goals
The key to avoid splurging your hard-earned dollars on junk is having long and short term goals. Whether this is a car, house, or saving toward retirement, working toward your goals is a great way to make sure that you’re managing your money correctly.