(October 25, 2019) – Life is full of decisions, some bigger or more impactful than others. This is fairly obvious.
What’s not so obvious is that some seemingly small decisions you make as a young person – we’re talking about money decisions – can have life-changing consequences, both good and bad.
To focus on the positive, here are three little moves you can make today that could make a big difference over the course of your life:
- Have a (smart) plan for your money. Don’t get caught up in the “I’ll have fun now and get responsible later” mindset. Once established, lifestyles and spending habits are hard to change and “later” can easily become “never.” Not sure you believe that? Ask your parents or grandparents and see what they think. To be clear, there’s nothing wrong with using some of your money for fun, just be sure to strike a balance so that you can also have fun later.
- Save first. As part of that smart plan for your money, be sure to save some of it – preferably right off the top before it can get used or allocated to something else. Try to save 10-15% of your gross pay, starting with an emergency fund set aside in a separate savings or money market account. If you can’t save that much right now start smaller and use pay increases, bonuses or gifts to increase your savings rate over time.
- Don’t buy an expensive car (yet). One of the first major and exciting purchases many of us make is buying a set of wheels. Who doesn’t love that new car smell? Unfortunately though, if you go too big, too young, this particular purchase decision could wreak havoc on your finances long after the excitement and new car smell has faded. To put yourself on a better path, buy a starter or economy car instead. Get something that doesn’t squeeze your finances or commit you to a long-term loan repayment. Try to keep your all-in transportation costs under 10-15% of your gross pay. Use the extra money you would have spent on the more expensive car to bolster your savings and put yourself in great financial shape. That way, you can purchase a more expensive car (and other things) later.
Source: The USAA Educational Foundation