Are you constantly checking your bank account, hoping to scrape by another week avoiding overdraft charges and dodging weekend plans with your friends because you don’t have any money? If so, you should know that you are far from alone. The truth is that many young people struggle with finding financial stability and don’t know where to start. Managing your money and setting yourself up for financial security down the line isn’t taught in schools and is hardly glorified by pop culture. Even still, it is one of the most critical lessons in adulting, and by mastering it, you will give yourself a leg up on being able to do the things you want in life later on down the road.
Here are the most important things you can do for yourself now to avoid the anxiety of bad finances down the road.
Secure Reliable Income
The first step to finding financial security may seem obvious but is overlooked by many. Finding a stable income in a field that will exist five and ten years from now allows you to start reliably taking in income and, more importantly, saving. By working a dead-end job that would be hard to replace, you expose yourself to the risk of being unemployed if something were to happen at your current position. This creates a potential scenario where you would need to spend any savings you do have, or worse, rack up debt to stay afloat while you find something new. Find a reliable career path and avoid this issue down the road.
Live Below Your Means
This is perhaps the hardest lesson to learn but is critically important. If your expenses are preventing you from saving a decent chunk of your income each month, it’s time to make some sacrifices. By living below your means now you set yourself up to save money and invest. Drive a BMW now, and a beater later, or vice versa? You decide…
Pay Off Debts
There’s nothing worse than the feeling of debt looming over you, especially if that debt is accumulating interest. Give yourself a clean slate and work towards paying off your debts before you start saving. Start with the smallest ones first, building momentum before you tackle the larger ones. You’ll be amazed at how fast they can be paid off if you commit to getting it done. If it feels like your debt is impossible to catch up on now, understand that the longer that it sits out there the less interested you will become in paying it. It’s important to take stock of exactly who and what you owe, and then come up with a clear and disciplined plan to rid yourself of the debt.
Credit makes the world go around, and you will learn, if you haven’t already, that it is critically important that you are seen as trustworthy by lenders. If your credit is poor, you suffer when it comes time to buying anything significant, such as a car or a home. Build your credit however you can. Secured credit cards and reporting your rent payments are an excellent place to start.
Pay Yourself First
Commit to saving a percentage of your income every paycheck. Once you deposit it into a savings or investment account, work to keep it there at all costs. Dipping into your savings is a terrible money habit and can keep you from ever accumulating a nest egg. While it might initially seem counterproductive to pay yourself first and risk having your creditors breathe down your neck, it’s important to realize that without prioritizing yourself first it will be extremely difficult for you to actually get ahead. When you agree to a payment plan with a creditor, whether that be for a credit card or the rent on an apartment, make sure you have a clear understanding of how long you can actually go without paying. Often times the date they’d like you to pay and the date you must pay to avoid ramifications are different. Pay yourself first, then adjust your strategy elsewhere to stay afloat.
Finding financial security can be one of the most freeing feelings in the world. It opens doors for you that would otherwise stay shut and allows you to pursue your dreams uninhibited by cost. Like anything building your financial security will take time and practice, but commit to it now and you will, without a doubt, thank yourself later.