Adulting & Finances: How to Avoid Early Financial Mistakes
The phase of ending college or university and starting adulthood is a tough one, especially for people with little to no experience in saving or managing their finances. There is a good chance in any given money that a lot of people out there are managing their finances independently for the first time in their lives.
Things are about to get real, real fast!
It is a big challenge that requires sacrifice, time, and dedication to maintain a financially independent lifestyle. This new time in people’s lives is often filled with new jobs, new cities, and new living environments.
Setting up a new living environment can cost a lot of money. Surprisingly to many, maintaining that living environment can cost even more money.
As someone who might not have a lot of experience, managing your own finances is one more thing you will have to handle as an adult. The good news is the older you get and the longer you do it, the better you are going to get at it.
Getting off on the right foot financially can have a major positive influence on your life and career. It all starts with a habit of savings and an effort to reduce your living expenses. The more you spend and the higher class of lifestyle you choose, the more life is going to cost you. This means you will either have to work harder or accumulate more debt along the way.
Life is about much more than just the newest gadget, the coolest ride, or the latest vacation hotspot. Day-to-day life on your own is not easy and can be a constant financial struggle. One way to make it easier and less stressful is to save money regularly and cut back on your spending. If you can reduce your expenses and cut down on your spending here and there, you will be in a much better financial situation than most people new to adulthood.
Think, how much does that credit really cost?
People feel if they have available credit on their credit cards, they have money available to spend. This is not the case. Using a credit card means that at some future time, you will have to pay back every single purchase you make in full, more often than not with interest. And if you pay it off in small amounts over months or years, interest can increase the total purchase price by 50% to 100% or more.
There are a few ways to work on this issue and become better off financially. An extreme way would be to become a financial analyst. You might ask what a financial analyst does. A financial analyst is going to handle and deal with money for a company or a large corporation. You would see how a big company manages money, how they spend it, how they do not spend it, and the value they place on a dollar.
You would see how a company uses money, and you might learn to manage your own money along the way. Obviously, though, this is a career choice that very few people can follow or are even interested in. For most people, increasing your income, reducing your lifestyle expenses, or doing a bit of both will work best.
Just a few solutions might include renting from your folks to lower your housing costs, remote commuting to cut transportation costs, and dining out less frequently. Such lifestyle changes can be tough, especially in a social dynamic where you might feel pressured to spend a certain way. Truth be told, though, these changes can make a huge difference to your finances.
Your priorities will shape your financial future.
Changes you make to increase your income or decrease your costs will completely depend on your priorities and what you feel is most important. Your priorities, whether short- or long-term, ultimately determine your actions and decision-making throughout your life journey. At this stage of your life, finding a life partner might be the highest priority, so you will likely spend more of your money on dates and social opportunities. If this is the case, you will have to give up spending elsewhere, like shopping or dining out, to afford what is most important to you at the moment. At the end of the day, you have got to balance your income with your expenses. Otherwise, you end up in more debt, which greatly decreases the amount of spending you can do in the future.
Whether it is your checkbook, bank balance, or lifestyle, something has to give. Your personal finances are not as forgiving as your parent’s. Your checking account is not going to give you a hug and tell you everything will be okay. If you make a bad decision financially, you will have to pay the price out of your own pocket.
Take comfort in knowing, though, that very few independent adults would ever choose to move back in with their parents unless absolutely necessary. The freedom and confidence of living self-sufficiently cannot be matched anywhere else.
Starting adulthood off on the right financial foot can put you in a good position for the rest of your life. You will learn the value of money, when to say “no” to yourself, what you can afford to splurge on, and when you deserve a treat. Everyone faces these similar battles though they will deal with finances in their own way. It is just one of life’s quirks to keep things interesting.