As an independent adult, you need to learn the skill of managing your personal finances. It requires careful thought around how you earn and spend your money to meet immediate financial obligations and achieve long-term goals such as purchasing a property and saving for retirement.
Here are four ways to assist you in accomplishing your goals if you’re struggling to strike a stable balance.
1- Manage your expenses and achieve your goals through effective planning and budgeting
The majority of us enter the professional world with debt and responsibilities that can include student loans and supporting family members. Thorough financial planning can help you meet your immediate obligations as you may find that your income needs to stretch further than you initially thought.
So, start by drawing up a long-term financial plan in which you outline your short-, medium- and long-term goals. This provides you with a holistic perspective, but it’s important to complement it with a realistic budget plan to ensure you stay on track.
2-Think about your future financial wellbeing
In your early twenties, the concept, let alone the actions required, of saving for retirement seem trivial. Many people have the mentality of ‘I’m young, I’ll start saving later’. The reality is that your retirement income is the result of the savings you accumulate throughout your career. So, the earlier you begin to save, the more money you’ll have to live off when you retire. It’s recommended that you start contributing money towards retirement from the moment you have stable employment and receive your first payslip.
In addition, starting to save early gives you the opportunity to reap the rewards of compound interest, which increases the growth rate of your savings.
3-Delay your gratification
It’s very tempting to buy something you otherwise couldn’t afford – all it takes is the touch of a credit card to a screen. Instant gratification through using credit can send you into a black hole of debt. You may reach a stage when you’re struggling to make the minimum payments.
Compound interest can work against you if you are indebted over the long term. Over the long term, the interest you pay on credit cards and loans can demolish your wealth and lower your credit score, making it more challenging to apply for credit (should you need it in an emergency) in the future.
4-Receive professional financial advice
A reputable independent financial adviser can use their experience to help you draw up a solid financial plan, taking your individual circumstances into account. This includes but is not limited to managing the amount of risk you’re willing to take, recommending appropriate investment vehicles, reviewing your policy/policies as your circumstances change and ensuring you follow a disciplined approach to money.
By having a robust financial plan, you can have the peace of mind that you can withstand unforeseen circumstances.
