I think we can all agree that transitioning from childhood and our teenage years to adulthood is definitely not easy. To say that there’s a lot you need to know in order to successfully navigate those treacherous waters, especially if your parental or educational experiences have left you lacking in that department is an understatement, so here’s a crash course in your top 5 need-to-knows for setting yourself up for financial success in adulthood.
Setting up a Checking (Debit) & Savings Account
Getting this account set up is the basis for everything else financial you will be doing in the future. Make sure to be educated on any monthly or yearly service fees, minimum balance requirements, and overdraft fees that may be applicable to your account and ask about student accounts if you are currently enrolled. Just visit your local bank and ask to open an account.
Do you need a credit card?
If you are approaching or already in your early 20’s now is the time to look into getting a credit card. The thought can be intimidating, but if you don’t have any other lines of credit (student/ car/ housing loans, debit accounts, etc.) then you will need a credit card to help build a credit score. Your ability to buy a car, get approved for housing loans or apartments can be dependent on this. Compare card benefits (sign up bonuses, cash back rates, interest rates, yearly fees, etc.) before you sign up and know that for every credit card you open or close will cause a short term dip in your credit score. This dip will recover with on time payments and low usage, so make sure you don’t go off the deep end with your new plastic and know your card’s limit!
Build Your Budget!
First and foremost, you need to know what ALL your monthly income and financial responsibilities are. Covering all your bills is first and foremost, then with the money left over there are a few things you need to consider: an emergency fund (try to aim for $30-50 per paycheck), money to save (10% is a good place to start if your income is low), any things you are trying to save for (this amount is personally set), and last but not least, your fun money will be what’s left at the end.
Create a Bill Calendar
Once you know what all your bills are, now you need to set up a calendar with reminders to pay or that the payment is being collected out of your account. Let’s say you get paid on the 15th and 29th of every month and you have 7 different bills that are collected monthly. Depending on how much your two paychecks are, you may need to ask the entities to which you owe money to move your billing date for 3 of your bills to the 17th and keep the rest on the 1st so that that way you don’t end up in a situation where you need money, but your account was just cleaned out because of your bills. If possible, try to keep a minimum of $500 in one of your accounts for your emergency fund. You never know what could happen!
Maintaining Your Files/ Staying up to date on your spending
Finally, make sure you have a safe box that is both fire retardant and waterproof to keep all of your important financial and personal documents (think bills from the mail, credit and debit card account informational packets, birth certificates, social security cards etc.) because you never know when you may need the official document. Also, look into apps like Mint that help you to track your spending habits so you know where your money is going and in what areas you can cut back if you need to save for something!
Once you have all this down and maintained, you will have set yourself up to be able to be financially stable! You’ve got this!