08/29/2019: The Best Financial Habits to Develop as a Young Adult
Young adults face many financial challenges. Managing money can seem overwhelming with day-to-day costs, taking care of your family, and paying off debts. Add in difficulties in the job market and typical entry-level salaries, and it might feel like you just can’t get ahead.
But despite these challenges — you’re in the perfect position to take control of your money and set yourself up for a solid financial future. Early adulthood is the best time to establish smart financial habits that will build the foundation for the rest of your life. Here are the top habits you can start today to manage your money and succeed.
Number 1: Live Below Your Means
The concept of living below your means isn’t new. It’s a key concept in financial classics like The Richest Man in Babylon and even in ancient Greek philosophy. In fact, billionaires Warren Buffet and Mark Zuckerberg take pride in their frugality and say it’s a key strategy for financial success. Mastering this concept as a young adult will save you a lot of financial stress in your future. If you make a habit out of spending less than you earn, you’ll have more to save.
Number 2: Recognize that Small Purchases Add Up
A lot of people don’t recognize that seemingly small purchases are what lead to overspending issues. Your daily $5 spent on coffee might seem like a small price to pay for something you enjoy, but that’s $35 a week, $150 a month, and $1,800 a year. We don’t mean to pick on coffee drinkers, but take note of all the little purchases you make and see how they add up. Making small changes can have a big impact on your overall ability to save money.
Number 3: Establish an Emergency Fund
Stuff happens. Cars break down, roofs leak, and companies downsize. None of these events are fun, but they don’t have to be financial tragedies. According to a recent survey, only 39 percent of Americans have enough money saved to cover a $1,000 emergency. Establishing an emergency fund will help you be prepared when the going gets tough. It’s a good idea to have enough money set aside to cover at least three months of living expenses.
Number 4: Start a Retirement Fund
This one is plain and simple. The sooner you begin saving for retirement, the more time your money has to grow. For example, if you put aside $3,000 a year at 25 and continue this for just 10 years then stop completely, your investment will have grown to more than $338,000 (with an assumed 7% annual return). If you put off saving until you’re 35 and save $3,000 a year for 30 years, your money will have only grown to $303,000 while you contribute an additional $60,000. Also, if your company offers a matching contribution on retirement plans, take advantage of this. It’s basically free money.
Number 5: Educate Yourself
Instead of relying on others for advice, take charge of your own financial future and read a few books and websites on personal finance. There are lots of great money management resources available to help you manage your money, and Peoples Bank is always here to help. Remember, you don’t need any fancy degrees or a special background to be financially smart — just a willingness to learn.
With the right habits and knowledge, you can succeed financially and manage your money with ease. The knowledgeable team at Peoples Bank is here to help you along the way. To learn more about our financial services, visit any of our locations in Cuba, Steelville, Sullivan, or Bourbon