Financial management is a necessity in every point in your life and that includes but doing it early on gives you a unique advantage. There is a case to be made with how early you need to be financially conscious but it usually starts when you get to college. This is because you start to get to experience a personal financial journey as you go through college.
It starts with the cost of attendance which seems to just go up every single year. This is one of the first real-world financial decisions you need to make. Do you opt for a community college to save money or do you take out student loans to cover everything? If you do, will your focus be on federal or private student loans?
After you graduate, you now have a lot more financial decision on your plate. You need to think about your first job. A lot of your financial management efforts will be based on what you earn from your first job. How much you make will have a big factor in how you manage your finances. Your income will dictate a lot of items in your budget so it is always a good start.
This makes it all the more important for single people to take control of their finances early on. Here are a few things to look into to help you do just that.
Create a comprehensive budget
The Time once came out with an article showing how challenged American consumers are when it comes to budgeting. It said that consumers have an idea of keeping track of their money but fall short of execution. This is a big problem if you start believing that you really cannot do anything to create a budget for yourself.
The truth of the matter is that it is not easy but it is a pretty simple process. You just need to commit to the process to make it work. One of the first things you need is to sit down and list down all sources of income as well as all your expenses. You need to remember to include everything including the small purchases you have every day from coffee to chips. This is an important aspect of financial management.
Once you have all the details on hand, you can now have an overview of your financial standing. You will see if your income can cover your expenses or if you need to make adjustments to make it work. There might be times when you have bigger expenses and you need to look for ways how you can lower them down or even earn some extra cash with side gigs.
Start to pin down your goals
Once you have a better understanding of your finances, you can now use it to help you shape your financial goals. You need to have some targets to aim for otherwise, you risk wandering aimlessly in life. You might wake up one day with nothing to show for all those years of working. As important as it is to work hard, it is equally important to work hard for a goal.
Some short-term goals you can have is addressing some debt obligations you have at the moment. It would be great to have some sort of plan to repay them all back in a timely manner. The more you put a process in your payments, the more you get used to it and it becomes like second nature to you. It lowers the chances of missing out on payments and improves your credit score as well with timely payments.
Financial management also means you need to have some long-term goals to aim for. These targets guide your present actions so you steer your path towards those goals. It can be buying a house in the future, setting up a business of your own, or even going to school for some post-graduate studies. All these can help shape how you manage your present finances.
Align your goals with your finances
Now that you have an idea what you financial capability is and what your goals are, you need to make sure that the two are aligned with each other. Your finances should be able to support your goals and your goals need to be realistic as well. This is a delicate balance that you need to juggle and adjust as time goes by.
You can even fast-track some of your goals when finances are doing good. If you get some windfall money, you can put that towards your retirement savings, emergency fund money, or even with debt payments. The important thing is to make sure you keep your goals in mind as your finances improve over time.
Be aggressive with debt payments
USA Today shares that one of the top financial goals Americans have at the moment is paying down their debt obligations. That is why it makes a lot of sense to make sure that you e a little more aggressive with your debt payments. For one, you get to manage your stress level when it comes to finances. That is because a lot of it has to do with the recurring payments you have to make. Financial management also has to do with addressing your debt payments.
There are a number or repayment strategies you can consider when you pay down your debt obligations. The debt snowball method is where you pay down the smallest debt amount first. As you pay it off, you add that amount to the next one. You do this over and over again until you pay off your loan. The avalanche method targets the debt accounts with the highest interest rate first. Then you do the same thing until you pay off all your accounts. You can also consider a debt consolidation program where you combine all payments under one account. This can lower down your monthly payment which is a good thing in a tight budget.
Financial management also means saving up for the future early
One of your goals needs to be for the future and that means saving for your retirement money. Retirement entails a lot of planning and you need to do it early on in life. The sooner you secure your retirement fund, the earlier you can retire. This is already a luxury since there are a lot of people who are forced to work well into their retirement years because they still do not have enough in the nest egg.
Take care of your health
Your health is one of the most important investment you can ever make in your life. You can even save money while getting healthy. More importantly, it helps you save money down the road. The healthier you are, you go to fewer doctor visits and spend less on medications. A healthier you also improves your quality of life and might bring you closer to the one you will spend the rest of your life with.
Starting off with the right financial management mindset while you are still single will help you in the future. It sets the groundwork so you can better manage your finances in the future. The sooner you get used to it, the more prepared you will be in handling bigger financial challenges.