Financial Tips and Tools for Young Adults

Planning for your future can be tricky business, especially financially. Finding the right financial advisor, resources and services that fit your circumstances can be difficult. Needs change as life progresses and circumstances arise. Here are some key tips for young adults ages 18 to 35 to establish a healthy financial foundation.

Financial Tips to Manage Finances

Establish a Budget: A budget is a plan for spending and saving. Create a written plan for your finances to make them easier and less stressful to manage. According to two separate surveys, a minimum of 75% of participants reported having a budget and at least 80% reported that they still overspend.  Additionally, one of those surveys revealed that 27% of participants feel they don’t need a budget. A budget provides a blueprint and a guide to your financial goals. However, you must be sure to periodically track your progress! A budget should be adjusted roughly every 3 months.

Make Use of Compound Interest: Compound interest is calculated using the previous balance plus any previously earned interest. For example, James puts $500 in a high-yield savings account with 3.80% interest rate. He then earns $1.56 in interest that month. He then decides he will contribute $100 per month to this savings account. After one year, he has $1,739.76 in that savings account. The total interest earned is $39.76 compared to a traditional savings account with a 0.1% interest rate where he would only earn $1.05 in interest.

Start Saving for Retirement Early: If your employer offers a 401(k) plan, ask if employer matching is available. Let’s say your employer matches your 401(k) contributions up to 4%, they will contribute an additional 4%, doubling your contribution to your retirement plan. Multiple studies revealed that more than 50% of participants lack retirement savings, are behind in retirement savings or lack confidence in their ability to cover their essentials in retirement. Remember to periodically track your progress to ensure the proper contributions are being made!

Build an Emergency Savings: Being prepared financially for emergencies is key to minimizing financial stress. 60% of respondents in a U.S. News and World report said they wouldn’t e able to cover a $1,000 expenses with cash or savings. A good rule to follow is the 80/20 Rule. 20% of what you earn is contributed to savings. This percentage can be adjusted up or down depending on circumstance. Most importantly, pay yourself first. Saving should be the first thing you do and not a last option. Remember to periodically track your progress to ensure the proper contributions are being made!

Start Slow With Credit: Only use a credit card for small, reasonable expenses including but not limited to utilities, food and fuel or emergencies. Keep credit utilization 30% or less. Pull your one free report from all three credit bureaus each year from Annual Credit Report.

Be Consistent: The key to any success is consistency. Sticking to the plan and regularly tracking your progress to make the appropriate adjustments is critical to maintaining the success that you achieve. Consistency leads to longevity!

Other Financial Tools

• High-Yield Savings Account: A traditional savings account earns 0.01% interest rate. Some high yield savings accounts can earn up to 3-5% interest growing your earnings at a much faster rate.

• Insurance: Insurance helps protect you from unexpected circumstances and covers you financially. Lower your health costs, car repair costs and your family in case of loss with insurance coverage.

• Individual Retirement Account (IRA): An IRA is a retirement account not provided by an employer. This allows the account holder to make their own contributions to their future retirement aside from a retirement account directed by an employer.