A recent survey found that 38% of Millennials and 30% of Gen Z feel unprepared for their futures, and are turning to social media platforms for financial advice. Many people are looking into guides on YouTube and TikTok for financial planning tips, often acting on the information they find — which isn’t always the best idea, given your unique needs and goals.
So how should young professionals manage their finances? If you’re starting your career after college and were able to negotiate for a fair starting salary — how do you make the most out of it? Here are four savvy finance tips to help make your finances easier to handle:
Turn saving money into a hobby
Although money is useful, it can be a big source of stress. According to one study, employed people had greater symptoms of depression and anxiety compared to those who are unemployed, due to job insecurity and financial concerns during the pandemic. If you’re someone who finds money management a headache, why not gamify it and turn saving into a hobby? Make saving money a fun, personal challenge.
With some research, you can find free local events and online activities for your entertainment. Shopping at thrift stores lets you find great deals on clothes, while using coupons can greatly cut down on your expenses. Find cost-saving substitutes on products like toilet paper, water, and pain relievers, which you can swap for generic brands. By reframing money management as a game, you won’t need to panic over your budget.
Be smart about your credit card
When you’re fresh out of college, you’ll likely receive a lot of credit card offers in the mail. If this happens, choose one card to sign-up for and use it responsibly. This means not putting all your purchases on your credit card, especially if you can’t pay your bill in full at the end of the month.
As much as possible, use your credit card on emergencies or big purchases. This strategy will let you build a good credit score, which will be invaluable if you want lower interest rates on a mortgage or a new car. One rule of thumb is to use no more than 30% of your available credit every month. If your limit is $1000, don’t spend beyond $300 and make sure to pay your bill in full on time.
Create an investment portfolio
For many people the concept of saving has already been drilled into their heads, which is great in terms of safety. However, a savings account is not enough to grow your wealth; you can only do that with investments. As a young professional, your time and capability to earn are big advantages when you invest early.
The most common features of an investment portfolio would include mutual funds, bonds, and stocks. You can also look beyond traditional investment choices and go into modern cryptocurrency, provided you use a regulated crypto platform. Regulated apps offer users a safe space to trade crypto, and some products are designed with beginners in mind. Just be sure to do your research on how these alternative investments work against your risk appetite, and only invest money you’d be comfortable losing.
Look into debt consolidation
Not all debt is bad. Smart debts, like student loans and mortgages, have long-term benefits so they’re worth it in the long run. What most people struggle with is their debt repayment strategy. There are different schools of thought on this, but one underappreciated solution is debt consolidation, which is the process of paying off multiple debts using a new loan or a balance transfer credit card.
Debt consolidation allows you to pay back several high-interest loans in one go, often at a much lower interest rate. This means faster payoff, as you only need to work towards repaying one debt. It’s not for everyone though, because there could be added costs and risks, so debt consolidation should be carefully considered among other repayment options.