It all may have seemed simple at school but living in the real world isn’t always easy. Life can be expensive, and navigating your finances is sometimes tricky business. It might be tempting to put “managing my money” into the “Too Hard” bucket, but getting started could be easier than you think. With some simple steps to start with, you could be managing your money like a fully-fledged adult in no time.
Budgeting basics
You probably don’t have endless amounts of money to spend each month. That’s where creating a budget comes in. It might feel like budgeting is all about restricting how much you can spend, but it’s more about understanding what you’re spending money on now and how this might impact your financial future.
As you create your budget, start with how much money you have. Note the amount you’re paid each month and where the money comes from. You might be bringing home a fortnightly paycheque, but also moonlighting as an Uber driver some evenings. Write it all down so you have an idea of how much you’re earning.
Then comes your expenses. Everything costs money, so try to include all your expenses—big and small. While some are the same each month (like rent or a car payment), many can change from month to month. Do your best to estimate these types of expenses (such as electric bills, dining out or travel) by looking at bills or receipts from the past few months.
Plug all of this plus your income into a spreadsheet and update it on a regular basis. As time goes by, you’ll be able to more accurately predict what money you need to put aside for expenses each time you are paid. You can also see how much money you’re saving (if any) and adjust your spending habits over time.
Which brings us to an important thing about budgeting—you need to stick to it! A budget is useless if it’s regularly ignored. An occasional splurge is usually OK, so long as you still have enough to cover your bills each month.
Looking To The Future
The next step in managing your money like an adult is to set financial goals. These are basically anything you’d like to do sometime in the future that will cost money. They might be small, like “pay off my credit card in full each month”, or larger dreams like saving enough for a house deposit within five years. Whatever you choose, setting financial goals could not only help you stick to your budget, but help you avoid spending money unnecessarily by helping you see the bigger picture.
If you have a long-term partner, it’s probably best to involve them in this process as well. You may not be sharing your finances just yet, but if you think you may be in the future then it’s probably wise to make sure you’re both on the same page with your future goals. They may feel that saving up for a holiday is more important right now or might prefer to rent for longer. Hashing this out could help you come to a happy agreement that doesn’t compromise your future financial health.
Know Your Rates & Fees
When it comes to savings accounts, loans and credit cards, it’s always smart to check the interest rates and the fees you’re being charged. These numbers could either help or hinder your money goals (and could derail your budget if you’re not careful).
Bank accounts are a smart way to help manage your money but beware of ones that charge high fees that eat into your balances. If you can, switch to checking and savings accounts that charge no or low fees, so you can keep as much of your own money as possible. A high-interest savings account could also help you maximise your money, rather than just parking it in an account that isn’t earning you any money.
If you already have a personal loan or credit card, check the interest rate you are being charged. Interest can turn into a significant expense if not managed carefully. Check what you are being charged and seek a better deal if you can. A lower interest rate could mean paying off debts months or even years faster.
Think About Protecting Your Future
It doesn’t get much more grown-up than thinking about life insurance. You may be young and carefree now, but you still may want to keep this on your radar. Your need for life insurance could change quickly—or maybe it’s already here!
When planning your future financial goals, think about the role life insurance might play in helping you secure them. Life insurance could help protect your financial future in the event of a terminal illness diagnosis or unexpected death.
Your family (whether that’s your parents, future spouse and kids, or other people who rely on you financially) might be put in a tough position if they no longer had you around to help provide for them. Life insurance could help make ends meet until they can get back on their feet.
Taking a more adult look at your finances is important, and there’s probably more to it than we can cover here. Still, the steps above are a basic guide to help you get started and know what to look out for. While it might seem boring, the more you learn about managing money now, the better off your future self is likely to be!
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