Setting out on your own as a young adult can be terrifying, exhilarating and super confusing. You’re suddenly expected to know what the difference between an out-of-pocket maximum and a deductible is, or how to invest in a 401(k).
This period is not just about paying bills, but about making your money work for you. And if you’re already deep in credit card debt, building your independence and learning to protect your money should be your first big-picture priority.
Your Financial Backpack: Tools for Your Journey
Think of your money tools like a backpack for a long journey. What do you need to bring?
Tool 1: Setting Clear Money Goals
Knowing what you want to do with your money helps you make smart choices.
- Short-Term Goals: What do you want in the next year? Maybe save for a new computer, a fun trip or a special class.
- Medium-Term Goals: What about in 3-5 years? Maybe saving for a down payment on a house or getting out of student loan debt.
- Long-Term Goals: What do you dream of further down the road? Saving for when you’re ready to stop working or owning your own business are two common dreams.
When you have these goals, you know where your money needs to go.
Tool 2: Understanding Your Income & Spending Habits
You hate to hear it but: Making a budget is pretty essential. Knowing exactly how money comes in and goes out is your map to the things you want in your future. The good thing is that drawing up a budget isn’t complicated:
- List all the ways you get money (your job, any part-time work, gifts).
- Track everything you buy: For one month, write down every single thing you spend money on. This means your rent, food, phone, and even little things like snacks or coffee. You might be surprised where your money goes! Source Link 1 (Track Your Spending)
- Find opportunities to save. After tracking, you’ll see places where you can spend a little less. Maybe you can cook at home more or find cheaper ways to have fun. Every bit you save can go towards your goals or paying down unsecured debt.
Boosting Your Money Power
You can do more than just cut back. You can make your money work harder for you.
Strategy 1: Smart Side Jobs
- Have skills you can use outside your main job? Think about tutoring, pet sitting or selling things you make. Even a small extra job can bring in money to put straight towards paying off credit cards or building savings for a goal.
- Put your extra money towards any high-interest unsecured debt, like your credit card balance or Buy Now, Pay Later debts. Paying them off sooner helps you save in the long run.
Strategy 2: Making Your Money Grow for the Future
Learn to Love Compound Interest: You might have heard how compound interest makes credit card debt grow bigger. But when you save money, compound interest works for you! It means your money earns money, and then that money starts earning its own money too. It’s like a small seed growing into a big tree without you doing much. The longer your money sits there, earning and growing, the more powerful this good kind of compound interest becomes.
Save for Retirement: It’s super smart to save money for when you’re older. Even a little bit put away each month can grow into a lot over many years because of our good bud, compound interest.
Make Thoughtful Investments: Investing means putting your money into special accounts that can help it grow for your future, often faster than just a regular savings account. Common investments include:
- Your Work Plan (401(k) or 403(b)): If your job has a retirement plan like a 401(k), money comes right out of your paycheck. Plus, many jobs add extra money to your account if you put money in – that’s free money for your future!
- Investment Funds: You can put your money into a “fund,” which is like a big basket that holds little pieces of many different companies. This helps your money grow over time.
When Bills Feel Too Big: Getting Extra Help
Sometimes, even with smart planning, your unsecured bills (like credit cards or personal loans) can feel too big to handle alone. That’s completely normal, and there’s help available.
- Talk to Money Experts: consulting a personal finance professional is always worth the time and effort. They can look at your bills and help you find ways to make them smaller or easier to pay.
- Debt Consolidation Programs: If you have unmanageable credit card bills, a debt consolidation program could be a stellar solution. You’ll get immediate stress relief by combining many bills into one affordable payment. Plus, a structured program like Accredited Debt Relief’s can help you achieve financial freedom in as little as 24-48 months.
While you begin your financial journey, don’t hesitate to get help before your debts grow any bigger.