Tips for Starting a Successful Business

The Four Key To Financial Planning For Young Adults

8 October 2020 by Brianna Cole

If you are a young adult who is just starting to work in your career field and support yourself, then you may figure financial planning is something that can wait. But it's not. You may not have a lot of extra money right now, but that's exactly why it is so important to have a plan. Some good financial planning right now can set you up for financial success in the future when you do start earning more. Here are the four keys to financial planning as a young adult.

Make a Budget

You need to know where your money is going. There are several different ways to budget, and it really comes down to personal preference. But an easy way to start is to make a list of everything you spend money on each month. Write down how much you plan on spending in each category. Add it up. If the total is more than what you earn each month, then you need to cut back on some categories. If the total is less than your monthly earnings, then surprise — you have money to put into savings or a retirement account, as discussed below.

Save an Emergency Fund

What if you have a surprise expense or lose your job suddenly? You need an emergency fund for situations like this. Start putting money into this fund each month, and don't touch it! You should aim to save at least 3 months' worth of living expenses in this account. Consider keeping it in an online bank account so that it's a little harder to access. You won't be tempted to spend it impulsively, then.

Put Something in Your Retirement Account

Experts will often recommend saving 10 - 15% of your income for retirement. If you're just starting out, this may be a little unrealistic. But you should at least be saving something — even if it's $50 a month. Invest this money in an IRA or a 401k through your workplace. Once your emergency fund is full, you can start contributing more towards retirement.

Aim to Earn More

Finally, you should be making a plan to increase your earnings! Learn new skills that qualify you for better-paying positions. Ask for a raise if you think you deserve one. Shop around for jobs every few months rather than always staying in the same place. Smart planning now can lead to a higher income later on.

For more financial planning advice that is relevant to your unique life, meet with a financial planner. It's not too early to get advice from a pro!

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