Millennials these days may be tech savvy, exceptionally talented, and socially active, but the truth is that most of you are not really familiar with the basics of financial management. Concepts such as budgeting, saving, and investing may be unclear, or even taboo, for you. However, these skills are important and may one day be critically useful toward your adulthood.
An international study has shown that among teens and young adults from 18 different countries, the knowledge of millennials in America in finance and practical money skills are just average. In the said research, 18 percent of the American respondents do not even pass the basic level of financial literacy assessment. This proves that most of you do not know how to deal with daily financial tasks like effective financial decision-making and even budgeting daily expenses.
As the so-called “Digital Generation” become used to spending beyond your means after earning instant money, you need to be educated and recognize that to become financially stable and attaining financial success, you must know how to budget, save, and invest your hard-earned money.
Taking this into consideration, some Asian countries have already started introducing financial literacy to students through coursework. Some universities have also introduced “technopreneurship” and investing to create a business-conducive environment in schools.
Yes, managing finances may be overwhelming for teens and young adults like you, but the sooner you learn how to efficiently deal with your daily expenses, save some of your earnings for future use, and invest good in promising investments, the sooner you can become more stable and financially successful.
Learn and develop an in-demand skill
To make sure that there is a continuous flow of cash in your wallet, you must have a job first – a stable job that pays good enough for you to sustain your lifestyle. This is why you should develop a marketable skill for you to easily land a job.
Jobs that are related to information technology and multimedia are in demand nowadays. For you to get a job in these industries, you must develop skills in programming, project design, and creative arts.
With this in mind, it would help you a lot if you are always eager to learn new things, even though it is not really related in the job that you have. Also, find the time to learn basic professional skills such as using Excel sheets, proper etiquette when using the office phone, or appropriate way of composing business emails. These skilles may be the one that can make you stand out in the workplace.
Set a daily/weekly/monthly budget
Having an established budget is of great importance because without it, you tend to overspend on unnecessary items and give up saving for “more important” purchases. With this, you must learn how to differentiate your needs, wants, and dreams.
To get started, you need to list down your daily expenses like food allowance, commuting costs, and monthly dues such as rent, utilities, and groceries. When you know where all your money is going, you can easily see how to prioritize your needs versus your wants to cut costs. Also you must also allot an amount for your short- and long-term savings goals and an emergency fund for unexpected dues and expenses.
In this generation and in today’s environment, everyone is at risk of getting harmed. True enough, mayhem could spark anywhere in the city, and calamities could happen anytime. As a young adult, you must be already responsible for protecting yourself and all the valuable things you own from unexpected disasters.
When horrible things happen to you, whether it be a trip to the emergency room or a fire in your apartment, insurance may save you from shelling out your money all at once. These days, you can apply for a life insurance without a medical exam.
Start investing on health cards, avail travel insurance whenever available, and make sure to also have your apartment or your car insured.
Make a plan on how to repay your debts
For most young adults, having debts is a reality. However, if you leave it unpaid for a long time, your debts can snowball into an amount that may financially paralyze you for years. It can set you back for a long period as your interest payments skyrocket while your credit scores drop.
If you applied for a student loan in college, see to it that you have made a strategic plan on how to repay it. Consider some programs put up by the government that can help you reduce the amount. A more convenient way to do so is to have it automatically debited from your bank account every month.
Also, if you own a credit card, limit yourself from swiping too much and establish a budget. Prioritize paying down debt on your credit card with the highest interest rate.
Keep an emergency fund
Some unexpected expenses can’t be covered by insurance alone so having liquid savings on hand is recommended. Having an emergency fund can save you from going into debt when unfortunate dark times come.
It is suggested that you need to keep a fund good enough to pay at least three months of your living expenses. Start by setting aside at least 10 percent of your salary every month until you reach your goal, or build it from your extra income from your salary bonus or sideline jobs.
Build up your credit history
For you to build up your credit history and make a good credit score, you have to take on some debt and show how you can manage it well. This score, along with the credit report where it is based on could help you achieve milestones and attain financial success. You can get a good credit score if you have lower rates on credit cards and loans. If you have a good score, you could easily get a lease or be employed right away.
Build a good financial grade by always paying your bills on time and make sure not to max out your card and use it sparingly. A part of your score is based on how much debt you have and calculated as a percentage of your available credit fund.
Be financially independent
In your journey to adulthood, you must start learning how to be self-sufficient and not being too dependent on your parents for your expenses. This is why you need to get a job and earn your own money.
You could also show your independence by getting your own insurance, mobile plan, and apartment. However, if the day comes that you really need the help of your parents, approach them in a mature and responsible way.
Have a clean public and online image
These days, your social media activity can be viewed by the entire cyber community including your current or future employers, business partners, and other professional networks. So you might as well get your act together with your digital presence and start cleaning up the mess on your social media accounts that could ruin your online image.
Also, publishing good content in the cyberspace could help you boost your online persona. Having a LinkedIn account could represent your professional potential. Show your expertise in the industry you are in through your tweets, Facebook updates, and Instagram posts.
Organize your important financial documents
Have your necessary documents like your birth certificate, valid IDs, diploma, transcript of records, and social security card in your possession. Also, keep a file of all your banking and investment accounts, insurance policies, apartment lease, and car registration and title.
Keep all of these in a secure place like an actual safe and make sure someone trustworthy enough knows where you put it. You may never know when you would actually need these documents.