When you enter your adulthood, many people don’t know much about how to manage their finances and get on the right track until it is too late. Finances aren’t a requirement to be taught in school, and many people end up having to learn about things on their own and often feel lost and confused by everything. Here are some of my favorite financing tips that I’ve implemented and love to use in my everyday life!
Budgeting and tracking your money
This is one of the best ways to start your financial journey. Budgeting your money can help you put your mind at ease by knowing the priorities in your budget first, then focusing on the fun stuff you want to spend your money on. There are many different methods to how you can budget your money, so try out some different ways to budget and use what’s best for you.
Tracking is another great visual to see where your money goes. Tracking every dollar you spend makes you realize what you spend your money on and the different areas you can cut back on to save money (if that is a goal for you.) There are many different budgeting and tracking apps and websites out there, or if you’re an excel user you can create a spreadsheet for your budgeting and tracking needs. Again, there are different ways to track your money, so finding a way that suits the way you want to track and will help you do it consistently will be the best for you.
Open a credit card
Opening your first credit card has many advantages. This gives you a simple opportunity to build up your credit score, which can help you in your future when going to buy a house, car, or taking out a loan. This can help you to have lower interest rates and better ways to finance these investments. Having a good credit score helps support you with proof that you are able to pay your bills on time and in full and use your credit card responsibly.
A general rule of thumb is to treat your credit card like a debit card, meaning do not put purchases on your credit card if you do not have the funds to pay it back. Credit card debt is hard to manage and recover from, since it collects interest and builds up the amount you owe over time, so paying off your credit card is the most important thing you can do. This is not something to be scared of though, as long as you use your card responsibly, you will have a low to no interest rate on the card.
Another advantage is the cash back that credit cards offer. Just by using your credit card, you are eligible to earn cash back on the purchases you make. A good first credit card is the Discover IT cashback card. With this card, you can earn 1% cashback on all your purchases, and an additional 5% cashback on different types of purchases every quarter, such as groceries, gas, restaurants, etc. Even though this may not seem like a lot, it truly does add up over time and you are able to use the cashback to pay off your credit card bill or even make purchases on amazon.
If you don’t feel comfortable using your credit card for everyday purchases, start slow by adding your reoccurring expenses (gym membership, gas, subscriptions, etc.) and paying those off on the credit card first to start building your credit score. From there you can add more expenses and use your card more regularly.
open a high yield savings account
Opening a high yield savings account (HYSA) is a great way to help make your money work for you. The difference between a HYSA and a regular savings account is the interest rates the accounts have. When dealing with savings accounts, these rates are beneficial since you can earn money instead of owing the money. The national average rate for a traditional savings account is 0.58%, with a HYSA, that rate can be 4.5%-5.5%. This allows you to earn more from interest with the same amount of money that you may have in your traditional savings account. HYSAs are a great option to store your savings and emergency fund to have and earn more money by just having the money sit in your account.
Financing can be very confusing and challenging at first, but starting slow and working your way through things can make the journey more manageable.