Do you have a child who recently entered the workforce? As a parent, you should still offer advice and guide them on their financial journey. To help you, we’ve assembled these ten financial tips for young adults to give you more information to help your child find financial success.
1. Spend reluctantly
Many young adults have not learned how to hesitate and question every purchase. Many buy without thinking. We as a society have bad spending habits.
In order to build financial wealth, you need some extra cash available to invest. So before you hit the buy button, scrutinize every potential purchase. Decide if it’s necessary or just nice to have. If you don’t need it, then don’t buy it!
2. Save regularly
Train yourself to be a good saver. Most people spend first and save what’s left over. That’s backwards. Look at your financial goal as a bill that has to be paid first.
Start saving money in your company’s 401K plan now. If you start early, you’ll be amazed how much money you compile over the years. And for those who have a company match, put as much away as you can.
For example, if you want to save one million dollars in 30 years, then save ten thousand dollars annually. You’ll earn five or six percent on your money so you’ll have one million dollars in 30 years! This shows how time and compounding work to your advantage when you save regularly at a young age.
3. Invest in real estate
If you have an investment portfolio with stocks and bonds, consider investing in real estate as well. Although it’s not for everyone, real estate can be a good investment for some people.
Most never consider investing in real estate because it is unfamiliar. Real estate can offer another option to generate returns both long and short term. It can also provide another stream of income.
Another option is to invest in a REIT – a real estate investment trust. Similar to a company that manages multiple mutual funds, a REIT is a company that owns or finances real estate properties.
4. Buy a smaller house
Everyone wants the big house. But do you need it? Don’t forget spending a large amount of money on the big house has a reverse compounding effect. With ongoing upkeep, you lose the opportunity to save.
Some people bite off more than they can chew and find themselves house poor. They have the big house, but can’t afford to fully furnish it or do anything outside of it.
5. Choose your spouse/partner wisely
With a 50 percent divorce rate, it’s important to choose your partner wisely. Divorces have major financial implications most people don’t foresee. So, listen to your gut and your friends. If you think you could be marrying the wrong person, step back and really think about how the decision could impact your life and finances.
6. Embark on a life-long learning journey
Be curious. Try to learn new things regularly. Improve your skill sets. Technology changes at a dramatic speed these days. Don’t get complacent with your knowledge. Keep up with it or you’ll find yourself outdated.
In addition, get more education about financial matters and learn as much as you can about investing. Many people don’t seem to have a good education about personal finance. The more you understand, the better you will be with managing your money. Plus your conversations with your financial advisor will be much more productive.
7. Don’t sweat the small stuff
Because of our rapidly changing world, stress levels are at an all-time high. Don’t succumb to it. Look at the big picture and don’t let yourself get caught up in the small, insignificant things. Don’t walk past the dollars to pick up the pennies!
8. Avoid debt
Unless it’s for a mortgage, career or car, incurring debt is not a good idea. Try to have as little debt as possible. Debt has crushed many people, especially young adults who have built up unnecessary debt. Credit card debt with its high interest rates is a key part of the problem.
This tip ties in nicely with the first piece of advice. If you spend reluctantly, you can keep your debt levels under control.
9. Don’t depend on someone else for money
Often times, couples will have children and one of the parents stays home. If the couple divorces or splits up, it’s hard for the stay-at-home parent to jump back into the workforce. Try to keep your skills updated and remain knowledgeable in your career field to avoid this difficult situation.
10. Choose the people you take advice from wisely
Everyone has an opinion and many people will offer advice even if you don’t ask. But not everyone has your best interest in mind or knows your personal situation. So, don’t take advice from just anyone.
Now that you’ve read through these financial tips for young adults, listened to our podcast for more details and pass them along to your children. Set them up for financial success! Want help from a financial expert, contact us today.