Welcome to adulthood! That may be the most terrifying sentence you'll ever hear (besides the dreaded 'We need to talk'). Being an adult isn't easy and the responsibilities that come along with this independence is enough to make you wonder why you were so excited to grow up in the first place.
For most of us, figuring out our finances is a solo journey. If no one takes the time to sit down and explain the basics to you, it can take a few years to discover that there is a method to the madness. To help you get started, check out our ideas on how you can start saving your money like an adult.
Don't Spend More Than You Make
Credit cards offer the temptation to overspend and it's easy to max out your credit limit when you think of this accessible cash as yours. But discipline is a big factor in how you use your cards.
Credit cards are an easy way to establish credit history and show lenders that you know how to manage your money. Keep your balances down and only buy what you can afford to pay off.
And When You Make More, Don't Spend More
When you finish school and land your first 'adult' job, that first paycheck is an awesome surprise. It feels like you deserve to treat yourself because you suddenly have the means to buy what you couldn't afford pre-job.
This is how the vicious cycle of consumption starts; the more money you have, the more you feel like you can spend. Put the extra cash each month toward student loan payments, your retirement, or save up for a vacation.
Try to Make More Than the Minimum Payment
A big chunk of some loan payments is interest. Over the life of the loan, this adds up to hundreds, or even thousands, of dollars. On lines of credit with a high-interest rate, the interest can build up fast and you might find that you suddenly owe way more than you borrowed.
Always try to pay off revolving lines of credit, like credit cards, each month to avoid interest charges. And make more than the minimum payment on other loans to pay them off faster and to save money in the long run.
Make Bill Pay Reminders Your Best Friend
We get it: You get busy and a bill slips your mind. While it may not seem like a big deal, late bill payments can affect your credit score. Set your payments on auto-pay or set up Bill Pay reminders so you don't miss any due dates. Just remember to review each payment statement to look for errors.
Keep Your Credit in Check
A higher credit score means you could get a much lower interest rate when you apply for an auto loan, mortgage, or take out insurance. That means big savings for you over time. Your total debt, length of credit history, and variations in type of credit are factors that impact your credit score.
Your credit score doesn't just impact your financial life; sometimes potential employers check your credit. Get a copy of your credit report each year and check it for errors or potential fraud.
Create Savings Goals
It's easy to quit saving if you don't have anything to work toward. Make your savings goal specific so you have the motivation to hit a tangible number and have some direction about how aggressive you need to be about saving.
For example, don't just say 'I want to save money and start and emergency fund'. Add in why you want to do this and decide what you want the end result to look like. Instead say, 'I want to save $3,000 in an emergency fund by June because the amount covers three months of my expenses'.
Choose the Right Housing
When you enter adulthood, it seems like everyone around you suddenly thinks you need to buy a house. For some reason, people are convinced that renting is just throwing money away. But if you don't plan to stay in one place for at least five years, then renting isn't a bad idea.
A mortgage payment might be cheaper than rent, but there are many overlooked costs of buying a home that first-time homebuyers forget about. Maintenance, upkeep, and renovations can eat up your budget fast. If you're not ready for these costs, then don't be afraid to rent a little longer.
If you take control of your money now, the rest of adulthood will be a piece of cake. Maybe.
Now that you're armed with the basics, make a savings plan that works for your lifestyle. You've got this!