As young adults just starting out, navigating personal finances can be daunting. You would hear much talk about setting financial goals, budgeting, saving, investing, pension, insurance, etc.
However, as scary as this seems, the truth is that you’re better equipped to handle your finances when you know exactly what to do at each stage. This is why it is crucial that you address vital financial questions as they relate to money management early on.
Here are seven money questions every young adult should answer:
QUESTION 1: What Are My Financial Goals?
The first step to money management is setting clear financial goals. Define your short-term and long-term money goals, whether it is saving for major expenses, building an emergency fund, or working towards a comfortable nest egg. Having clear goals will provide you with the much-needed direction and motivation for your financial decisions.
QUESTION 2: How Much Should I Save?
Saving money is a vital cornerstone of financial stability. You should aim to save at least 20% of your savings, including pensions and emergency funds, while also allocating other funds for utilities. To make saving a habit, consider automating your savings contributions with features like Raven Target Savings and Raving Fixed Savings; this should relieve the pressure while you become used to it.
QUESTION 3: Do I Really Need A Budget?
Budgeting is an essential part of managing your finances. With a well-planned budget, you are much better equipped to track your income and expenses, ensuring that you live within your income whilst prioritising your financial goals.
Create a budget that tracks income, expenses, and savings goals. Allocate funds for essentials, savings, and discretionary spending (entertainment, dining out).
QUESTION 4: Do I Need Insurance?
The quick answer is YES! As a young adult, having a suitable insurance plan, especially health insurance, will keep you protected against unexpected resource-dwindling emergencies. If you own properties like a house, car, etc., consider also getting insurance coverage on these.
QUESTION 5: How Do I Choose The Right Financial Partner?
As young adults, having the right financial partner by your side will significantly impact your financial well-being. Be sure to evaluate your financial needs and goals before deciding on a financial partner. Are you seeking essential banking services, investment opportunities, loans, or retirement planning assistance? Understanding your needs will help narrow down your options. Make sure that these financial partners offer the services you need.
Be sure that your selected financial institution has a solid reputation and a history of financial stability.
QUESTION 6: How Much Do I Need to Start Investing?
There’s no right or wrong amount to start investing; however, there are varying factors to consider when choosing to start investing. In some cases, the investment broker may set minimum investment requirements, which would determine how much you need to start.
To diversify your investments, you will need a larger initial investment. However, like with all financial decisions, evaluate your current financial situation, including your income, expenses, savings, and debt obligations. Make sure you have an emergency fund in place to cover unexpected expenses before you start investing.
QUESTION 7: What About Retirement?
The earlier you begin to plan for your retirement, the better. As young professionals, it is important that you begin to plan for your retirement. The earlier you start saving for your retirement, the sooner you reach your financial goals.
As young adults, addressing these money questions will help you build a solid financial foundation for the future. Taking control of your finances early on will see you on the right path to financial success and security.
