One of the buzzwords of this age is “adulting.”
This basically refers to the often-difficult transition from being a carefree youth looked after by parents into an independent young adult faced with numerous overwhelming responsibilities. This is not a novel life occurrence unique to millennials – it’s just that they came up with a hip term for it.
The most important responsibilities that today’s young people face are those tied to their finances such as housing, car, utilities, and daily living essentials. Many find managing all these a challenge to stay on top of because they are not equipped with the right financial lessons.
If you are a millennial who wants to be the master of your finances, it is easy enough to become one. Helpful resources are available. And to launch you into your goal of becoming a financial-savvy individual, provided below are three tried and true tips to prepare you for adulting responsibilities.
1. Learn the right way to use a credit card
These are some of the smart rules for credit card ownership:
Only use your credit card for regular bills
It’s best to limit credit card use for your essentials because these are financial accountabilities that you can easily set aside payments for. Therefore, you prevent the likelihood of spending beyond your budget.
For other purchases such as groceries and items you want and need, use cash.
According to financial expert, Dave Ramsey, “You spend less when you use cash.”
This is because you actually feel the value of money leaving you and your wallet. So when making a purchase, you are inclined to think more carefully if you really need to make it because paying in cash “hurts.”
Take advantage of cash-back or rewards programs
Do not ever overlook the cash-back or rewards program of your credit card because this can help you cover certain expenses and save money in the long run.
Limit your credit card payments to 30 percent of the credit limit
Building your credit score is crucial for financial decisions you are likely to make in the future. If you want to build a good one, as much as possible, keep your credit card payments to just 30 percent (or even lower) of your available credit limit.
This is a strong indication of your ability to manage your resources, which is what you need to convey when you apply for any kind of bank loan in the future.
Never carry a balance
Financial coach, Erin Lowry, a.k.a. “The Broke Millennial” says, “Pay your credit on time and in full to truly enjoy the benefits of a credit card.” The main idea here is you will be negating the benefits offered by your credit card if you pay interest often.
Also, life would be less complicated if you are not constantly working on completing payments.
2. Create a savings account for different things
Most people are fine to just have a single savings account. But, if you want the act of tucking away money to really work for you, it helps to open different bank accounts.
Make sure that you have separate bank accounts for your emergency fund, retirement fund, your future children’s education fund, and others.
This is a great tactic for compartmentalizing as well as preventing unnecessary spending. If you are completely aware of the purpose of the money tucked away in a specific account, you will leave it alone unless it’s time to serve that saving’s purpose.
3. Frugality will serve you well
Finding ways to save more money can safeguard your future.
Therefore, do not give in to the usual behaviors expected of adults that will only lead you to waste your money, such as happy hour at a bar or pub after work . Frequent after-work enjoyment does not make you more “adult” than someone who heads straight home after the office to do house chores.
Chelsea Fagan of The Financial Diet also points out that getting a big house is another adult expectation that is useless. A big house can even become a liability to someone who wants to be a master of his or her finances. It costs more upon purchase, and it costs more to use and maintain.
Instead of buckling to “fancy” societal expectations of adulthood, focus your eyes on being smart with money by living within or even below your means. Leading a modest lifestyle can ensure that should one of life’s many rainy days happen, you have money to live off of until your life gets back on track.
Adulting can truly be challenging, but you can succeed at it.
By applying the tips shared here, you can transition more smoothly into an adult who is fully in charge of and thrives in his or her life.