Three Key Money Tips for Recent Grads
If you’ve just finished high school, congratulations! You’ve made a great achievement, and you’re on the brink of a whole new stage of life. As a young adult, your relationship with money is likely to involve both more freedom and more responsibility. Here are a few ideas to help you set off on the right foot.
1. Keep track of your money
One of the most important things you can do for your finances is also one of the simplest: Just pay attention! There are lots of apps you can explore that help make tracking your money easy, and even fun. Or you can do it yourself by creating a spreadsheet and categorizing everything you spend and save. Whichever method works for you, the key is to be as detailed and concrete as possible about where your money goes.
Even if you aren’t ready to start setting financial goals, tracking your money still has some important benefits. For one, even if you don’t deliberately change your behavior, knowing more about your spending habits may help you make good choices. It also gives you some great data that will put you well on your way to creating a budget, whether you take that step now or a little further down the line.
- Track your money in an app or a detailed spreadsheet.
- Use what you learn about your spending habits to create a budget.
2. Automate your finances
Tracking your spending is just one of many ways you can use automation to put yourself on the path to financial success, so don’t stop there! You can also set up automatic transfers, which may help you save money faster with far less temptation to spend it. Automatic payments are a great way to stay on top of your bills and avoid late fees, which is important to building good credit. You can even set up automatic alerts on your account to help limit certain types of spending, or to let you know when your account reaches a certain balance threshold.
- Use automatic transfers to save money more effectively.
- Set up automatic payments and account alerts to avoid late fees and build credit.
3. Learn about compound interest
When it comes to your money, few things are more powerful than compound interest — the interest that accumulates on interest. Over time, compound interest can turn a small amount of money into far more. Unfortunately, the same is also true for debt.
It’s difficult to see the effects of compound interest in the short term, but in the long term it can make the difference between financial freedom and debilitating debt. The potential impact of your choices (both positive and negative) is greatest when you’re young, so do your future self a favor and start learning about it now.
- DO start saving money and investing — the sooner, the better.
- DON’T live off credit cards or student loans, even for emergencies.
The information provided here is general in nature and may not apply to your specific situation.