Are you young? Are you financially sufficient? Do you want to be financial sufficient? Many people like it, but only few succeed. Unfortunately, we cannot find the lesson in our education system. There is only math but not financial math. There is only language, but no financial language. So being financially savvy is not something young adult is prepared to, especially if they are not living in environment that is supportive to it.
So, rather than contemplating on that, let’s just take a look at these 7 tips for young adults who want to manage their finance. If you are an adult and want to manage your finance too, you are so welcome to these tips.
1. Be Discipline
Being discipline is a concept that hard to grasp, especially in these days as liberty and freedom is seen as priority in life. Discipline does not only mean marching on Mondays or getting into class on time. It is a practice of discipline, yes.
Discipline is when you can control yourself and your behavior. It is when you are able to say yes to things you don’t like but necessary, and say no to things you like but will destroy you.
People with discipline, as written by Professor Rhenald Kasali in his book ‘Self Driving’, has self-control, focus, and responsibility. It has to be trained since childhood, and practice regularly until you are no longer has self-control due to natural symptoms, for example dementia.
Yes, it is a learned behavior. If you are a young adult and you accept only minor training in discipline, you can learn and practice by yourself. There are loads of books and trainings to help you to it.
According to a 2013 study by Wilhelm Hoffman, people with high self-control are happier than those without. The study discovered that the self-disciplined people were more capable of dealing with goal conflicts.
This also works in financial aspect of your life. Manage your finance means that you buy only the essential things, and save your money from indulging yourself too much.
There was someone who said: I need to indulge myself because I have been working real hard. Well working real hard now and save money incessantly means that (maybe) you don’t have to work too hard later in life.
Oh yeah, watch out for those online shopping too. If you don’t see your money taken out of your wallet, you might not realized you have spent much. Photo by: freepik
2. Set Your Financial Objectives
Management always side by side with achieving an objective. So, to manage your finance efficiently, you need to set your life objectives and relate it to your finance. It can be beautiful honeymoon with your spouse, or continuing your education, or travelling around the world. It can also be early retirement.
Setting an objective gives you an idea on how much you need for the future, and how can you get there. Don’t be afraid to set your objectives high, higher than your current condition allows you to. If you reach for the star, you may not reach it, but at least you can reach the sky. But if you only aim for your house roof, then where will you land?
3. Follow Your Money
It sounds like a detective movie plot. But you need to keep tracks on your money. See how much you spend each month. Look for things that you can do more effectively. Look for large things in your expense bill, and find out how you can do it differently.
Have a monthly budget, monitor it closely and evaluate it at the end of the month to know where your money is going.
Restrain from the use of credit card. Credit card is paid later on. It creates the illusion that this month you are not using so much of your money. Next month, you will get confused on why the bill is so high because you cannot seem to remember you spend so much.
Photo by: freepik
4. Start an Emergency Fund
An emergency fund is a readily available source of assets to help people in financial dilemmas. It includes the loss of a job, a debilitating illness, a major repair to home or car. It is very useful in major national crisis such as the coronavirus pandemic situation.
An emergency fund should cover between three and six months’ worth of expenses. The longer the better because we don’t know how long until we get another job. We do have some kind of safety net such as BPJS. But don’t rely solely on that.
Emergency fund should not be placed in risky assets. It should be in time deposit or government bonds.
5. Plan for Retirement
You are still young and you should plan for retirement. Save a certain amount of your money each month to investment. It does not have to be overly large, but consistent. If you have more to save, save it.
The younger you start the better. Why? Because of the way compound interest works, the sooner you start saving, the larger money you will get when you reach the retirement age. Again, do not rely only on BPJS or social safety net. They only give minimum amount for living. You want to live big, right?
6. Invest Your Money
If you have money to spare, where are you keeping them? In your house vault? In a bank? In your friend’s business?
When you are young, you can afford being a little bit more risk taker. Only young adult jump from cliffs just to prove themselves. Young people have the tendency of taking more risks. Use that for the advantage of your money too. Invest in a more risky businesses, such as owning a company, buy franchised business, invest in equity, and so on.
7. Protect Your Health and Wealth
Being sick, especially debilitating sickness, can incur huge costs. An operation might take millions from you. Fortunately we have Health BPJS, but an additional insurance will not hurt.
Have a healthy life so you decrease your chances of getting sick. Just by eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, and driving safely, you'll thank yourself down the road when you aren't paying exorbitant medical bills.
Buy health insurance to be more secure. You can save money by getting quotes from different insurance providers to find the lowest rates.