Saving is usually not a priority among most youths but considering how the employment market is changing, these youngsters are up for a real challenge if they don’t learn basic financial management before they enter adult life. The truth is that many in this age bracket do not have many responsibilities hence the lack of motivation to manage their income better. The problem is, youthfulness is fleeting and many end up getting to the next phase of their lives with no securities whatsoever, and the pressures of adulthood start taking a toll on them.
The point of advantage for the new generation is the myriads of opportunities both online and offline. In today’s economy, a young adult cannot blame lack of income for limited opportunities in the economic space. The traditional economy is well supplemented by the thriving digital economy and no one can leverage the online ecosystem better than the youth. Even generational activities like gaming have been commercialized in online spaces and it’s almost impossible to believe that today, even teenagers can retire before their adult life begins by just playing games professionally.
New Ways of Earning Money
Financial management becomes even more important considering the change in the employment market with an increase of Freelance jobs and decrease of traditional employments with monthly wage.
Add to this new professions like Gamer or Influencer and we quickly realize young people need to learn to manage a budget. Consider the example of Anathan Phan, the teenager from Melbourne who bagged $4.6 million last year, or the American teenager Kyle Giersdorf who walked away with a $3million cash prize from the Fortnite video game tournament. What financial advice benefits a young person who never had a “traditional” job and suddenly earns a big sum of money?
Well first of all, their story indicates that young people today have a different relationship to “earning money” and about gambling than their parents. There are many young people today with dreams of becoming a “gaming guru” and making money playing poker or video games doesn’t matter. While their parents may consider casino games questionable, young people today don’t discriminate one type of gaming over another. Casino games are just as good as video games.
There are enough success stories from the e-Sporting industry, influencers and YouTubers to convince young people it’s possible to learn how to build a thriving career online or as a gambler. The question is how well they understand the financial challenges of those types of incomes. These “jobs” may pay out high, or not at all and there is no stable monthly income. Young adults need to understand the governing rules of managing funds and accumulating wealth to start closing financial loopholes early.
Below is a practical guideline to a healthy financial life for all of us, but especially young adults.
Budget Management
An essential skill for healthy financial growth is to know how to manage your income-expenditure ratio. Here, you have to make sure that your expenditure stays below your income. It would be best to check your micro budgets, to ensure no money is wasted on unnecessary purchases.
To effectively manage your budget, you must first ensure that needs are taken care of, especially the basic ones. In this step, it would be best to remember that needs are the things we cannot survive without, such as food and shelter. You then consider the most relevant wants, reducing the list whenever it’s possible to increase savings. Wants are the things we desire but can do without, such as snacks and entertainment.
Remember that consistency in saving is all that matters in the long run and in no time a saving culture will come naturally.
Get Rid of Credit
Work done to pay credit is work done for someone else. Creditors know how to forge language to lure customers into taking loans, and unnecessary credit cards. Loans require an extra interest amount during repayment and accumulative fines if the payment is defaulted. With the lack of adequate regulation among financial operators, a considerable number of youths are caught in debt traps. This should be the starting point when beginning your financial security journey.
To pay the minimal amount of interest, you have to start by clearing loans with the highest interest rates going down the list. Some loans may not have urgency; hence they can be paid last. After you are debt-free, start accumulating through savings to avoid getting drawn back to debts. Bad credit is a problem easily caught but difficult to solve and improving credit scores take time so staying away from bad credit is essential.
Plan for Emergencies
Without an emergency fund, most people are forced to take hefty loans or sell assets to get raise money when an emergency strikes. To avoid credit, you have to prepare for such events in advance. You, therefore, have to divide your incomes to have an allocation for everything.
To develop a sustainable plan, always allocate an income percentage to the emergency fund account. Doing so would enable you to accumulate little amounts consistently, rather than saving massive amounts less frequently. You also have to develop an unrelenting discipline against spending emergency funds.
Learn Taxes
Governments are powerful enough to strip anyone of their financial status, no matter how prominent they are. You, therefore, have to make sure that your records with the tax collector remain clean. Failure to pay taxes may lead to huge losses of property in the future if caught. You may also wish to start a business, and having a good tax report would open a pool of advantages to your business.
To become self-sufficient in financial matters, you have to force interest in topics such as tax. It will later pay off when you learn the tricks that the wealthy use to manage taxation. For example, Warren Buffet, the CEO of Berkshire Hathaway and one of the richest men on the planet, reports that he cuts down taxes by preferring payment in shares rather than money.
Save for Retirement
Everybody hopes to retire early. Although this seems like a daunting task, it is relatively easy when you commit to a monthly savings goal. It would be better if you also took advantage of compound interests offered by financial institutions and let them contribute to your overall amount.
Compound interest helps boost your savings, which is unattainable when saving independently. You also have to learn tricks to supplement your income. The earlier you start, the better— the more considerable the amount in the account, the better.
At first, financial planning seems like an exhausting and self-depriving process, but it breaks down to a nexus of simple decisions and calculations. To be a good financial planner, you have to muster consistency and financial discipline.