Learning how to properly manage finances can be an overwhelming process for anyone, but especially for young adults earning a salary for the first time. Common questions can include:
- How do I create a budget?
- When should I start contributing to retirement? It seems so far away!
- Should I open a credit card? How do I select the right one for me?
The answers vary from person to person, but there are a few skills the MAI Capital team believes everyone should learn as early as possible.
1. Managing Cash
Research several reputable banks and screen the options for fees, such as maintenance or overdraft, to find out which best fits your financial situation.
2. Budgeting
Manage your income and expenses by using the 50-30-20 method.
50% – Living expenses & essentials: rent, groceries, utilities, and other day-to-day needs.
30% – Flex spending: dining, travel, and other fun activities.
20% – Financial goals: savings, debt, buying a home, and more.
Use tools like an excel spreadsheet to track how and where you are spending money currently and how you might adjust to avoid overspending.
3. Savings
Define your goals based on a timeline:
1 year or less: short-term emergency fund
1-5 years: mid-term
5+ years: long-term
This way, you can allocate resources according to your needs, like a downpayment on a home, purchasing a vehicle, or a last-minute emergency that arises. By planning ahead, you may be able to avoid difficult financial situations that negatively impact your future.
4. Retirement
When you start your first job, contributing to your retirement may seem overwhelming. But opting into a 401K or a Roth 401K early can set you up for great success down the road. Educate yourself on the options available to you, like an employer match, and consider meeting with a financial planner to make the best decision for your future.
5. Credit Cards & Loans
Building a credit history is important, but use these tools responsibly. Focus on paying off existing debt as soon as possible to avoid interest rates and fees.
6. Tax Returns
File on time and correctly. There are many tools available to file your taxes at a minimal cost, especially while your finances are less complicated. If and when your finances become more complex, review your options with a professional who can guide you through the process.
7. Protection
You work hard for the money you earn, so protect your assets. Research coverage and premiums to protect against unexpected losses or damages, such as accidents, illness, or lawsuits.
At the beginning stages of your career when you first start earning money, it can be difficult to think toward the future. But it is important that you do so. Balancing enjoying life while also planning for anything unexpected is an important skill to learn. Educate yourself in these 7 areas to get a head start on your financial future.
If you have questions about any of these topics, please reach out to our team at info@mai.capital so a team member can help.
If you have any questions related to this topic or your portfolio in general, please do not hesitate to reach out to your wealth advisor at any time.
Please send your questions, comments, and feedback to: info@mai.capital. Any statement non-factual in nature constitutes only current opinion of this author which is subject to change without notice. Certain statements are of future expectations and other forward-looking statements are based on management’s current views and assumptions. Any statistics mentioned have been obtained from sources we believe to be reliable, but the accuracy and completeness of the information cannot be guaranteed. Neither the information nor any views expressed should be considered investment, legal or tax advice, or constitute as a recommendation to buy or sell any security, strategy, or product. It should not be assumed that this is a forecast of future events or that any security transactions, holding, or sector discussed where or will be profitable or that the investment recommendations or decisions we make in the future will be profitable. Past performance is not indicative of future results.
