The Young Adult’s Cheat Sheet to Early Financial Freedom

From getting pocket money and stipends to earning and managing your own money, the 20s can make or break your financial future. It is not easy to transition into adulthood from the comfort and convenience of a sheltered childhood. You are now responsible for your financial health not to mention, your physical and mental well-being as well. 

So if you are a young adult or Gen Z, you might be looking for financial freedom. Now, to make this achievable in the current economic climate, you need to start with financial planning early on to get ahead of the game.

Here is access to a cheat sheet for young adults to achieve early financial independence!

Understand Debt

As someone in your 20s, the first debt that you would be shouldering will be your student loan. Ensure you understand the terms and conditions of your loan, including the interest rate, repayment tenure as well as if there is any provision or benefit for early repayment. You can develop a better payback strategy once you have all the information. 

It is best to not take on high-interest debt in your early years, especially things like car loans or credit card expenses. Rather, work towards paying back the existing loan on time, to ensure a positive credit score. 

Another popular credit option among young adults is to choose payday loans to tide over the cash deficit by the end of the month. You must ensure you only borrow from providers who offer safe payday loans. These lenders will not have any hidden fees and by paying back the loan within the tenure you can grow your credit score. 

Be Clear of Your Financial Responsibility

As a young adult, you are probably transitioning from staying with your parents to living on your own. This is when you understand the actual cost of living, which includes everything from rent and security deposits and paying for utilities and rents. 

To have a secure financial future, make sure you create a realistic budget based on your monthly income. Look for opportunities to save money within your budget. For example, if you can afford to pay a rent of £700 per month, live in an accommodation that charges £500. Start making your coffee, instead of purchasing from a coffee shop every day or take the train or carpool whether heading for a weekend getaway or to the office, instead of buying a car.

When renting, ensure you read the agreement and have a clear understanding of the rental terms before signing in. These small things can help you save money.

Start Saving

The number one rule for saving is to start early on. You don’t need to save thousands of pounds in the first few years of your career, but even the most nominal saving can go a long way. The best saving rule is the 50-30-20 method. Where 50% of your money goes towards your essentials, 30% of your income is for your wants, it is what is not a necessity but what your heart desires. The remaining 20% must go towards savings and investments. 

Depending on your current economic situation, whether you are knee-deep in debt or are almost done paying off your loans, you can put more money towards paying off your debt or investing for your future.

From the moment you start earning, you must contribute to your emergency fund. This is your cost of living for a minimum of six months.

Educate Yourself

Unless you have a degree in finance or accounting, many of us struggle to understand even everyday finances, let alone investments in bonds or pension funds. You can speak with a financial advisor, or your parent or even Google the fundamentals of financial.

Financial literacy can help you to make better decisions and understand concepts like tax savings and filings. This can empower you to make sound decisions in the future regarding your finances.

Financial literacy will help you avoid scams and phishing which can cost you a huge portion of your hard-earned money and lead to mental stress and anxiety.

Boost Your Income

As someone who is starting in your career, you have many opportunities and options to explore. Keep upskilling yourself, so that you can land the best-paying job possible. You can also try your hand at a side hustle or freelancing to supplement your income.

Summary

As a young adult, by making smart decisions early on, you can receive financial freedom very early on in your life. Financial literacy, saving early and paying off your debt on time can allow you to retire early. Young adults today have numerous options to save and invest their money. However, by understanding the pros and cons of each investment option, you can grow your money securely.

It’s important to be in control of your money and not let money control you.