Getting free financial advice early in life can be a game-changer between a life of poverty and wealth. Unfortunately, most schools never teach us how to manage, save, and invest our money.
Young people particularly in Africa transition to the financial independence stage in their 20s. For the first time in their lives, they have to make key financial decisions. Due to the lack of knowledge, many literally eat their opportunities at becoming millionaires.
Research shows that financial knowledge among young people is often low. So many young adults in the transitioning stage are inexperienced in personal finance. Many are clueless about saving money, investment, and how to stay out of debt.
For everyone who never took finance or economic classes in school, this free financial advice is for you. Sadly, habits are not built in a day. Therefore, the earlier you begin to put this financial advice into practice the higher the chance of mastering them.
1. Always Create a Budget
Most of the time, when a person earns the first salary, anxiety overrides everything. In this state, several people usually find themselves in frivolous financial transactions. Well, here is our first free financial advice for you, always budget before the payment arrives.
Common consequences of failing to budget your money include out-of-control spending, lack of savings, financial stress, and getting into debt. To avoid that, plan and manage your money by creating a budget.
A typical budget mainly includes your income, expenses, and financial goals. Start with something simple like the 50/30/20 budget or 80/20 budget. Creating a budget helps you to know how and when to spend your money. Budgeting will help you to control your spending, avoid unnecessary debts, and ultimately achieve your financial goals.
2. Build Financial Self-Control
There are many things that can make your spending get out of control. For example, grocery stores place impulse items in places where you must see them before leaving the store. Maybe a show that everyone is talking about becomes available for download and you can’t wait to see it, but an episode costs $2.
Your favorite store sends you regular emails showing the latest deals. All these offers can be a huge temptation to your self-control. So, you need to build up your spending self-control. Here is another free financial advice: unsubscribe from receiving emails from groups that are likely to send offers.
Lack of financial self-control triggers impulsive spending. In the end, you will have less or nothing left in your wallet. In the worst situation, you will even spend money meant for crucial purposes like utility bills. No doubt, spending money usually offers instant gratification. However, it is an express route to drowning in debt.
So, learn to restrain yourself and stick to your budget. Remember, your behavioral habits take a wild ride when your spending goes out of control. Don’t make excuses for frivolous purchases and avoid places where you’re likely to spend unnecessarily.
Also, skip expensive social events and avoid purchases that will push you further into debt. The route to a healthy financial future is to keep your savings up and your spending down. Never forget that!
3. Setup an Emergency Fund
Another great free financial advice is setting up an emergency fund. No matter how huge your spending, debt, or student loan may seem, and regardless of how little your income is, it is wise to set aside some emergency money in your budget. Doing this regularly will keep you out of financial trouble when unforeseen happenings arise.
You will have money to manage situations such as job loss, sickness, or car problems without getting into debt. You can even set specific amounts for particular situations that you would want to cover. Labeling emergencies makes it easier for you to realistically allocate funds to them.
Thankfully, there are apps today that help you to automate your emergency savings. We listed some of them in our previous post. Here is another free financial advice from us: treat your emergency fund like your employee and pay it every month.
4. Use your Credit Card Responsibly
A credit card is a convenient mode of payment. However, you need to pay it off on time to build a good credit rating. A good credit score tells lenders that you are debt-worthy. Some credit card companies offer appealing rewards to clients with a high credit score.
However, don’t have a habit of making all your purchases using a credit card. The ease of payment it offers can throw you into impulsive spending. Eventually, you may run into a debt trap that will take years to pay off.
So, use your credit card in rare and pressing situations or when emergencies arise. Also, ensure to pay your credit in full when you get your bill. Furthermore, avoid having more credit cards than your finances can allow. This is critical when it comes to building a good credit history.
5. Start Saving for Retirement Early
In your 20s, retirement may seem far off. In fact, this is a common excuse people use to justify why they don’t save for retirement. But accumulating sizable retirement savings is not possible if you start to save late.
So, start saving for your retirement early. This is particularly important because of how compound interest works. If you start saving early, you will need to invest less principal to accumulate a huge amount by the time you retire.
Simply put, a person who starts to save $100 a month in their 20s will accumulate more in their retirement account than someone who waits until mid-40 to save $1000 a month. Also, an employer-sponsored retirement plan is a great way to save for retirement because of pretax contributions.
Here is another free financial advice from us: start saving from your first earnings. Save before you spend.
6. Invest Early
Many young adults tend to neglect any investment decision until they attain financial stability. However, twentysomething is a prime time to invest, even with a low salary or while still paying off college debt. Although young people may not have huge sums of money to invest, they have one important resource—time. Time allows an investor to take risks.
Volatile ventures are known to yield more returns on investment. As a young investor, you have time to recover if anything goes wrong. Thus, you have the opportunity to make a riskier investment. By investing early, young adults can take the advantage of the gains from compound interest.
Starting your investment journey early helps you to focus on budget, spend wisely, and cut expenses. Lessons learned through early investment pay off heavily in the long run. Young adults who don’t have much to invest can capitalize on the little they have by investing in stocks and mutual funds.
Another free financial advice from us is that you don’t need to wait until you’re rich to invest. If you are so scared of losing money, invest in stocks and shares.
7. Save Money for a Purpose
Having a clear purpose or goal makes saving money easier. Whether you want to accumulate money to buy something or avoid hardship, your savings will benefit you in the future. Take time to reflect on the reasons for saving your money.
Attach a purpose to your savings. Come up with both short-term and long-term saving goals. Without a purpose, you might easily withdraw your savings and use the money for trivial reasons.
Once you know why you need to save, you will become more committed to your saving goals. It is also crucial not to aim toward achieving all your goals at once. Instead, concentrate on one long-term goal and short-term goals that blend well with it. That way, you can comfortably save the amount you have set.
8. Choose Worthy Investments
Think about your viable investments and determine how much money you want to put in each. Evaluate them in terms of risk and returns. Investments that have a higher return mostly have a higher risk. Besides, choosing investments with fixed returns can help you to accumulate huge interests before you retire.
Diversifying your investments is a great way to manage risks and maximize rewards. Determine the best investment strategy. Whether you use value investing, buy-and-hold investing, or growth investing strategy, your goal should be to minimize risks and maximize returns.
9. Guard your Health
A crucial free financial advice you will not hear often is that “You can’t enjoy wealth if you’re not in good health.” Having a health insurance cover will enable you to comfortably pay for hospital bills. With today’s high cost of health services and medication, health insurance is not an option but a necessity.
Apply for health insurance if you don’t have one. Employers usually offer health insurance to their employees. However, if you’re buying health insurance on your own, find out the available insurance providers and the plans they offer.
Review quotes from different companies to determine the best and most affordable plan that you qualify for. If you have some health challenges, seek advice from insurance providers regarding the appropriate plan to apply for.
For young people under parental care, the best choice is to remain under the family health insurance plan if one is in place. You should also eat healthy foods and exercise regularly to stay healthy. Doing that will keep you from spending much of your retirement money on medication and doctor’s appointments.
10. Take Charge of Your Financial Future
An important aspect of personal finance is taking control of your financial future. If you allow other people to entirely manage your financial future, they might misuse that privilege and mismanage your money.
Some commission-based financial planners may approach you in the name of offering free financial advice but with ill motives. Others may not be ill-intentioned but may not really understand your future financial goals. Some may want you to put your money in risky investments.
Rather than depending on others for financial advice, take control and read any free financial advice that you can find. Invest time and effort in reading about personal finance. With relevant knowledge, you will be able to control your financial future and avoid being caught off guard by people that don’t have your financial interest at heart.
11. Discuss Money Matters with your Partner
Finances are a leading source of arguments, tension, and even separation between partners. It is highly likely that some tension will arise at some point in a relationship or marriage. The key to addressing financial issues is being honest and open with each other regarding spending habits as well as financial goals.
Ensure that you both agree on how to manage spending, pay bills, and share finances. If financial or personal circumstances change, it is important to talk to each other about ways to manage the situation.
Talking about money matters with your partner will help you know more about the person. The conversation will help you to build trust in your partner with regard to saving and building wealth together.
12. Invest in Financial Education
Most schools don’t teach personal finance as a core subject or offer free financial advice to students. However, you should not be ignorant of the severe financial consequence of this reality. Enroll in a course that will educate you about money matters including budgeting, saving, investing, and managing debt.
Also, buy personal finance books and educate yourself as much as you can. Subscribe to finance blogs and attend seminars on personal finance. Finally, consult experts for financial advice to boost your financial literacy—some may even give you some free financial advice in the consultation process.
13. Have a Side Hustle
Succeeding in life requires that you’re ambitious and hardworking. Whether you are in college or employed full-time, having a side hustle can help you to earn a little more income. This could be a freelance project, a business that you can keep running while doing your main job, or anything else that can bring in extra cash.
A side hustle will provide extra income that you can use to cater for some expenses, build wealth, or pay off debt. Besides getting extra money from the side job, the experience will add to your portfolio. Your side hustle could even turn out into a full-time job.
14. Avoid Get-rich-quick Schemes
Any get-rich-quick scheme only works for the individual that sells it. Such people drain the money and energy you should be using to invest and build wealth. For the first months, they offer deals that are too good to resist, but afterward, things begin to go south.
Also, these schemes are illegal and you will hardly get your money once it’s gone. We asked a finance expert to give free financial advice to our readers on this topic. He said, “If the offer sounds too good to be true, you are right, it is a scam”.
15. Be Financially Content
Being financially content is an important financial principle that everyone who desired to attain their financial goals someday should practice. Learn to be content with your financial situation. It doesn’t mean that you should stop working toward your goals.
Instead, financial content means that you’re satisfied with the current situation as you work towards what you want to achieve. In other words, you don’t buy a home you can’t afford. It’s about finding contentment where you are today as you work toward your future financial goals.
Knowing the basics about finances is not a luxury but a necessity. Fortunately, you don’t need a special background or a fancy degree to know how to manage your finances. Simply master and practice the free financial advice we outlined to become a better manager of your money.
If you have already made some mistakes, pick the lesson and move on. As you work, save, and invest, take time to treat yourself and relax regularly. Most importantly, never compromise health for wealth or you will spend wealth to get your health back.