Prepare for worse and do not get into debts
When you first get a credit card, you may find the possibility of a microloan extremely appealing. "I don't have the money today, but tomorrow, I'll get a scholarship and pay that money back," someone might think. Yet, once they get the scholarship, they go to a bar with friends instead of actually repaying the loan. Situations like this can pile up, putting you in a terrible financial situation and, most importantly, making you morally frustrated. Historically, the amount of money in many people's accounts is directly related to their mental state.
The advice not to get into debt is unlikely significant enough for you because sometimes you just need to do it. However, you can avoid this trap by making yourself a financial cushion from which you can take money when necessary. This will be your own bank to which you, as in the actual bank, will have to return the money, perhaps even with interest. So, pay off your debts and become financially free. If you still are not, then build an emergency fund.
Do not be afraid to take your first step into investment
Many of us think investing money is a pastime for rich people who want to get even richer. Stocks, exchanges, investments, and so on are all too complicated processes that are unavailable to ordinary people like you and me. However, you should not be so categorical about yourself because many people became rich just by playing on the stock exchange. You can spend your money on fleeting pleasures, and you can save it in a piggy bank (good luck when inflation comes), but none of this will be as effective as trying to increase your capital.
Don't treat the stock market like a game of chance. Spending all your money on stocks is just as thoughtless as throwing your money away and hoping it will return. Always have a financial safety cushion you can rely on if your business goes bust. Once you are back in financial stability, analyze your mistakes and try again.
Believe in yourself, not some experts
When you have already gotten over yourself and decided to buy your first shareholding, several barriers may appear. The first and the main one is the "expert opinion" of people who actually understand absolutely nothing about investments. If this or that expert tells you to put your money into a dubious project, you should first analyze this project yourself, weighing all the pros and cons before making such a decision. However, if there is one thing that will always be relevant, it is life cycle funds, such as Fidelity Freedom Fund 2050.
Such funds have a set date at which the investment procedure changes for the investor. So, for example, while initially, Fidelity Freedom Fund 2050 may allocate 85% of the portfolio to stocks and 15% to bonds (as long as you are 30 years old), when you reach age 50, Fidelity Freedom Fund 2030 may allocate 60% to stocks and 40% to bonds. In other words, this fund would be a good option for those who do not really know much about investing and need to be adjusted by professionals with minimal effort.
Keep track of your expenses
There are different ways to distribute your income depending on the specific needs of each of us. So, while Stacy is thinking about developing her career, she can spend 60% of her income on various courses, 20% on utilities, 10% on entertainment, and 10% on the piggy bank. On the other hand, Mike rents an apartment, and 50% of his income should go only to pay the rent. Therefore, this division of the budget will be completely different for him.
However, we will not compare the situations of Stacy and Mike because the important thing is not how much money they have to spend on certain expenses at the moment. The critical fact is that they both must strictly adhere to the plans they have developed to cover both priority needs and relax and save money. Create an envelope system in your banking applications to clearly track these opportunities. Educate yourself about personal finance, put cash in these envelopes, seal them, and spend on things that are truly necessary, avoiding thoughtless purchases.
Do not buy this coffee
You are likely to be skeptical when you are told to cut back on unnecessary expenses. "But I can't live without my double cappuccino with salted caramel and cinnamon syrup that I drink every morning," you'll say. Well, such a reaction is understandable, but you still need to be conscious in this context. Buying a six-dollar cappuccino every morning means you're spending about $120 a month.
And imagine how much you spend on other habits like smoking or junk food! Of course, you can't completely deny yourself small pleasures like a picnic with friends or a movie night with popcorn, but you've probably already grasped the point. Set a budget that you'll use each month for entertainment and stick to it.
Choose online banks
Choose banks with high interest rates. While earning through a bank may not be as effective as, for example, earning through investments, it can still be beneficial in its own way. For instance, you can opt for a bank offering a 3% interest rate instead of a traditional bank offering 0.5%. By depositing $100 in the first bank, you could earn three dollars instead of fifty cents, as in the second case. While this may not seem like much, your percentage will be higher with larger figures.
In this context, you can rely on online banks that do not have physical branches at their disposal. This reduces their servicing, personnel, and advertising costs, allowing them to offer higher interest rates. You can open a savings account with one of them, which will serve as your piggy bank while also accruing interest.
So, you've reviewed the budgeting tips for young adults. Chances are, you still have many questions and uncertainties about becoming a millionaire or avoiding starving in old age. However, the truth is that no finance tips will help you as much as your own experience. Start saving money right now, turning it into bigger and bigger capital. Don't be afraid to invest, and don't be scared to lose. Someday, after many trials and errors, you will become the person others turn to for personal finance advice.
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