How Should Young Adults Prepare for Financial Success?

//How Should Young Adults Prepare for Financial Success?

How Should Young Adults Prepare for Financial Success?

By |2018-11-26T07:53:01+00:00December 1st, 2018|Wealth & Home|

As a business minor, an accounting class is a requirement for my graduation. For five semesters, I managed to push off this inevitable class. I had been told it was a grade killer, one of the hardest business classes on campus, and an overall horrible time because of the immense challenge it presented. Finally, and reluctantly, I enrolled in the class last semester and luckily survived.

So why am I telling you this? While I don’t plan on becoming an accountant – my brother got those genes – the course did teach me important skills that I will use in my everyday life.

One Tuesday afternoon lesson, in particular, really stood out to me. As the lecture dragged on, like it usually did, my professor suddenly put a video on the board. On the screen stood a gentleman who began explaining how a 21-year-old who invested less money than an older individual actually ended up with more money in the bank.

Even though I can’t remember the details, that point made me start to think about my own financial future. Now that I am actually 21, I still think about this lesson all the time. There must be more things I could do right now to prepare for financial success, I always say to myself.

I’m already establishing credit, buying stocks, and budgeting, but there must be more, right?

Parents, once you’ve taught your children about the factors that contribute to financial success, next you should make sure that they know what actions to take to achieve such success. Young adults, it’s time to start being smart with your money, so follow the advice below.

Start Budgeting

I know – you’re young, excited to finally be out in the real world, and want to spend, spend, spend. Unfortunately, as you know, that isn’t the smartest idea. As a young adult, it is important that you spend your money wisely. That’s where budgeting comes into play.

Once you get your paycheck, immediately allocate it to different needs in your life, whatever they may be. Rent, food, savings, student loans, etc. After you put the necessary amounts toward your specific vital needs, then you can use the rest as your miscellaneous spending money.

Little things like cooking dinner instead of eating out, buying one less drink at the bar, and saving that shopping spree for another time could make all the difference in your financial status. Be frugal when you are starting out, and sooner or later, you’ll reap the rewards.

Start Investing

The lesson is simple: Start putting money in the bank now and see it multiply over time.

Find accounts that have compound interest. This mean that you will see a return on your investment without having to do anything. Just put the money in the bank, don’t touch it for a while, and see the dollars increase.

Investing doesn’t only apply to banks, though. Start to explore the stock market and consider investing in companies that seem suitable to you. With the unpredictability of the economy, this could be a risky move, but only if you invest frivolously. Be smart with your money, do research on the stock market and consult with friends or family members that have experience with this kind of investing. If you don’t have any to talk to, ask a pup your question and we will help you out!

This past fall, my finance professor introduced me to Investopedia, an online resource with current information on the stock market. Use this website as a starting place to learn about the price and status of stocks that interest you.

Start Planning for Retirement

You just landed your first job, moved into your first apartment, and received your first paycheck – why would you want to even think about retirement? But, the success of your retirement, which although is still decades away, is determined by the decisions you make right now.

Explore corporate retirement benefits and take advantage of them! Some employers match your investing, others don’t. Choose the best option for you.

If you’re employer offers a 401(k), be sure to open an account. For those that don’t know, a 401(k) is a retirement savings plan sponsored by the employer where you can add your income before the income is taxed. However, withdrawals are not tax free.

The current trend for young people is opening Roth IRAs. You may have heard of this type account but, like me, never actually knew what it was. Come to find out, Roth IRA’s are special retirement accounts funded by post-tax money. They are popular because future withdrawals from these accounts are tax-free. There’s a catch, though. Roth IRAs are only allowed for those in lower tax brackets both before and during retirement.

You can easily achieve financial success if you are conscious of your monetary actions right now. Budget, invest, and think about retirement – no matter what age you are. The earlier you start, the better off you’ll be!

What things have you been doing to prepare for your financial future? Do you have another piece of advice that you think fellow Through Wolf’s Eyes readers would benefit from? Share your story with us or tweet @_wolfseyes your advice. We would love to learn from you!

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