As a young adult, you might have plans for your future and goals that you want to achieve. It’s okay to have that big dream of owning a big company, building your career, or achieving financial independence.
However, before chasing your dreams, you need to form good financial habits to be able to know how to manage money effectively. For young adults, this is a great time to start learning these habits and shape your future.
Here are five financial habits you should develop as a young adult:
- Set Financial Goals
Your financial goals are the first step if you want to improve your financial habits.
To be effective, your financial goals should be SMART (Specific, Measurable, Achievable, Relevant, and Time-bound).
For example, you may say, “I want to own a business.” Sounds vague, right? But when you say something like “I want to invest $100 in a car wash business that will wash five cars a week at $30 each, generating $150 a week, $600 a month,” it’s much more definite. Let’s break it down:
Specific—Starting a car wash business
Measurable—Aiming to wash at least five cars a week to make $150
Achievable—Investing $100 for business expenses
Relevant—Most car owners will want this service for its time-saving convenience
Time-bound—Achievable within a month
Financial goals don’t always have to be big. Small goals, like saving $10 per week or setting aside a percentage of your income, also help build good financial habits for growing your finances over time. The key is to set clear, realistic goals and track your progress. For further reading check out The Powerful Impact of Financial Literacy on Students and Their Careers
- Invest in Yourself
Young adulthood is the best time to start investing in yourself. The skills, knowledge, and experience you gain now can set the foundation for your financial success. There are a lot of ways to invest in and build yourself:
- Learning a skill
- Paying for a course
- Starting a business or a side hustle
- Building a career
- Building your brand
When you invest in yourself, the knowledge, skills, and experience can be leveraged to build your financial growth and shape your future.
- Have a Budget for Your Finances and Track Your Expenses
When budgeting your finances, consider these three things:
- Your income
- Your needs
- Your expenses
They all work together to help you figure out your exact monthly earnings, what you need to spend the money on and how to allocate resources for it. To do this, you can use a notebook, spreadsheet, or budgeting app to record it. This financial habit gives you a clearer view of your finances and helps to control your spending.
- Spend Within Your Means
This goes hand in hand with having a budget. To accomplish this, prioritize your needs over your wants and know what unnecessary spending you can cut out. For example, instead of spending hundreds of dollars to eat out at restaurants, try making home-cooked meals for yourself. That way you’ll save money and eat healthier food. To avoid debt, you should avoid extravagant spending as much as possible.
Learning to live within your means is a key financial discipline that will help you build long-term financial security and responsible money habits.
- Save Emergency Funds
An emergency fund can come in handy at any time. When certain things happen, like when your car breaks down or you lose your job, your emergency funds can be a real lifesaver for you. The importance of emergency funds is that they give you financial security, a safety net so that you can handle life’s uncertainties and keep them from disrupting your financial plans.
Aside from emergencies, these funds can help in other ways—they can help you with other plans and other things you couldn’t afford to do financially otherwise. For example, they can help you:
- Fund a personal project
- Start a business
- Buy office equipment (a laptop, printer, etc.)
If your finances can’t support these goals right now, consider saving in small amounts over time to make them achievable.
Building great financial habits might seem to be a daunting task, because you’re going to have to adjust to things you’re not comfortable with, but these habits will prepare you for financial growth in the future.
So, start today and incorporate them into your daily life, and you’ll be on your way to financial success!
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