When you’re entering the adult world for the first time, it can be overwhelming. There are tons of skills you need that you may not have, like cooking, doing laundry, or managing your finances. And while we can’t teach you how to fold a fitted sheet (try asking Mari Kondo), we can give you some tips to help you plan your financial future.
Find Your Balance
We’ve all heard the older generation stress the importance of balancing your checkbook. This advice is solid, but a bit outdated. After all, when was the last time you had to write an actual check? The financial world has gone digital, and there are tons of tools that can help you live within your means. The first stop is your bank. Most banks provide an ongoing ledger of all of your activities online. This makes it easy for you to see what’s coming in and what’s going out. Can’t remember all of your autopayments? There’s a simple solution – schedule them on your phone’s calendar. That way, you can see exactly when a payment will come out and plan accordingly.
Know What You Own
Student loans are an unfortunate necessity for many college students. If you want a college education, you’re going to have to pay for it (at least for the time being). While politicians love to use student loans as a talking point, there hasn’t been any legislation that will help lower the cost of a higher education. Before you sign up for a hefty student loan, think about your plans for the future. If your dream job only pays $30,000/year, paying off an $80,000 loan plus the interest is going to be tough. And what about students who don’t know what they want to do? Instead of taking out a loan for a degree you’ll never use, take a look at trade schools instead. From plumbers and beauticians to computer programmers and air traffic controllers, there are a wide variety of careers that don’t require a college degree.
Another thing you’ve probably heard people talk about is making a budget for yourself. You might think that this doesn’t apply to you, but whether you have a job, are on mom and dad’s payroll, or are living off loans, you need to know where your money needs to go so you can afford the fun things in life. How can you do this? A good place to start is to look at what monthly bills you have. Whether it’s a credit card bill, rent, or a car payment, there are some expenses you know you’ll have, and you can pretty much estimate what they’ll be. There are also other costs you need to consider, like groceries or gas, that can vary from week to week. Do your best to estimate what you’re spending every month and use that as a starting point.
After you add up all of your expenses, see what you have left. This is the money you can use to save and to enjoy yourself. Many financial experts go by the 50/30/20 rule where 50% of your money goes to bills, 30% is for fun, and 20% should be saved. These percentages might not be realistic for you right now, but remember, your budget is a living thing and it will change with your situation. So, if you get a better paying job, you might be able to save more. Or maybe you have a month full of unexpected expenses, so you have to cut down in other places. But with a budget in place, you’ll be able to have a general plan in place.
Here at Happy Tax, we’re committed to helping you understand your finances so you can make smart decisions with your money throughout the year. And when tax time comes around, we’ll be here to help you file correctly and on-time. Your future will be here sooner than you think, and we want to make sure you have the financial skills you need to live a happy and prosperous life.