Striking out on your own as an adult can be a hectic – and often – emotional time in your life. With more freedom, your lofty life goals and dreams often bring extra stress and struggle. We’ve all been there – adulting is hard, but you shouldn’t have to go through it alone. In this blog we’ll discuss seven tips for managing your finances as you chart your own path forward.
Tip 1: Find your purpose
It is easy to say that you want to start effectively managing your finances. It’s an entirely different beast to follow through on that goal. Getting a handle on your finances can be a time-consuming process. While the cost of living is lower in Muncie, Indiana than say California, expenses and debt are applicable anywhere - to anyone. Think about the goals and people you hold close. Whatever your purpose, hold it tight. Cleaning up your finances might be a long process. When the going gets tough, think about your “why” and keep moving forward.
Tip 2: Good or bad, see where you stand
With any goal, you can’t move forward if you don’t know where you are in the present. Take an inventory of your current financial situation. A few suggested actions:
- Bite the bullet and look up your credit score
- Make a list of current income and and expenses/debt
- Track your short-term spending
- Calculate your net worth by subtracting your liabilities from your assets. If you've found a positive number, congrats! If the number is negative be honest with yourself that you have a little more work to do. *Remember - net worth does not equal personal worth.
Tip 3: Imagine your financial future
So far, you’ve determined your why and evaluated your current financial situation. Now comes the fun part – time to dream. Where do you want to be financially? First, think about your long-term goals. Do you dream of one day retiring and journeying across the country? Make sure to prioritize a retirement savings now. Reap the rewards of investing by starting while you’re young.
Next, think about short-term goals. Are you focused on saving for a down payment on a new car in the new few years? Are you hoping to plan a trip sometime next year? There is no right or wrong type of financial goal – however, there are wrong approaches to saving for those goals. Be honest with yourself about these goals and the path to achieving them.
Tip 4: Get on a budget
As you start to take your finances seriously, its time to put the work in – locking down your budget. Do you know what you’re spending each month? What is the need vs. want ratio of your expenses? Rome wasn’t built in a day, and neither will your financial future. The key step is getting a handle on these numbers. Use our Home Budget Analysis tool to begin this process.
Tip 5: Build an emergency fund
Life happens. If you haven’t already had a major financial emergency, then you likely will at some point. Calculate the amount of expenses you’d incur in a 3-6 month period. Use that as your guiding number in creating your emergency fund. Prepare today for whatever life throws your way.
Tip 6: Pay off your debt
Over 14.8 million millennials have student loan debt, the most of any generation. They also carry an average balance of $38,877 per borrower. We say that not to scare you, but to prove that you’re not alone in paying off debt. Make debt repayment a priority. Learn about our GreenPath service
, which can help you develop a plan for paying off debt and making your dreams a reality.
Tip 7: Prepare for the future
Part of learning how to adult is how to look past today. Here are a few items to consider that can set you up for a bright financial future:
- Build and maintain good credit
- Think about investing (caution - make sure to do your research)
- Think about the various types of insurance
- Life insurance
- Renters insurance
- Disability insurance
- Car insurance
- Property insurance
- Take the time to invest in yourself - you've put in the work. Experience the rewards.
I’m a big Disney fan, so I figured it’d be fitting to leave you with a quote from The Lion King.
“The past can hurt. But the way I see it, you can either run from it, or learn from it.”