The money choices you make in your early adulthood can affect your finances (for good or ill) for the rest of your life.
No pressure. 😉
We know the massive quantity of decisions you have to make right now can feel overwhelming. After all, there are so many choices and possible outcomes! No wonder so many young adults are paralyzed and stalling when it comes to getting their finances in order.
But not you.
You have this guide. Use it to help you navigate most of your money-related choices and to help motivate you to get started on a path that will pay dividends going forward. Your present and future selves will thank you.
Consider this a cheat sheet to helping your wallet get a head start.
#1 Track your spending
Your first step to manging your personal finances is to be fully-aware of what's coming in and out of your wallet. It's easy to spend a little here and there only to not realize why an entire paycheck has vanished before the week's end. Tracking your spending, whether on paper or with an app on your smartphone, will set you up with the foundation for better money management and mindfulness going forward.
#2 Open at least one checking and one savings account suited to your needs
How many accounts you have will probably increase as your financial journey continues. But for right now, you'll need at least one checking account so you can pay bills and recieve direct deposits, and one savings account you can set aside funds in. (As a bonus, you can get a checking account that offers rewards, like one of these.) We recommend taking the time to consider your options and avoid accounts that will charge you fees or require large deposit amounts that make it challenging for you to get started.
#3 Learn how to budget
When done regularly, budgeting can be a life-changing financial practice. You can use an app, spreadsheet, or physical notebook to track your budget. Set up amounts based on your unique circumstances, or follow a simple budgeting rule like the 50/30/20 needs/wants/savings budget. If you're unsure how to set up a budegt that you'll actually stick to, you can set up a free financial coaching session with one of our certified financial coaches and we can provide you with templates and one-on-one coaching to help you get started.
#4 Get in the habit of checking your accounts regularly
Even with regular budgeting, surprises can happen. Getting in the habit of checking on your accounts at least weekly will keep you on top of them. Plus, it can be motivating to watch your accounts grow!
#5 Open a credit card and master using it responsibly
The most important thing when it comes to managing a credit card is paying off your balance in full every month. In fact, even if you don't use your card, it's reported as being paid in full every month. If you open one of the credit cards from Canopy, we won't close it for inactivity, so it can just set in your wallet (or safe, or freezer if you're worried about it) while it helps you increase your credit score.
#6 Set short and long-term financial goals
Choose some practical goals (such as a down payment for a car), and some fun goals (your dream spring break vacay) that you can track and use to motivate you to keep going.
#7 Take on as little debt as possible
Can you cut your college tuition bill by taking classes at a community college, applying for schlarships, or shortening your program length? Can you purchase a less attractive, but significantly chepter commuter car instead of the fancy wheels you've been eyeing? As little debt as you can accrue during this period in your life equates to significantly less drag on your financial future.
#8 Start contributing to a retirement account
If it seems like retirement is too far off to even think about, look into the magic of compiunding interest. Investing even a little bit in a tax-advantaged retirement account now could result in significantly more interest earned than if you wait until you're in your 30s or 40s to start. If you're not sure where to begin, you can schedule a free consultation with our CFS Financial Advisor Rick Hoskins (all Canopy members are eligible for a complementary session).
#9 Learn how to comparison shop and watch for sales
Waiting for a promotion can equal big savings. Especially on larger ticket items, such as car insurance, appliances, or a new smartphone.
#10 Set up savings accounts for sinking funds
These could include things like a new car down payment, vacation fund, tuition payoff, wedding, or house down payment. Getting started now will make your dreams feel more feasible over time.
#11 Set up an emergency/rainy day fund
The thing about the unexpected is you can actually expect it to happen. Having a cushion socked away will have you ready for it, whatever "it" happens to be.
#12 Take advantage of any employer benefits, if you have them
Also, when you're job hunting, keep them in mind. Perks of employement go beyond a paycheck: it can include health insurance, employer 401k match, and more. Learning about these different benefits before accepting a job offer can significantly impact your life in the long run.
#13 Track your progress
What gets measured gets moved. Plus, it's inherently motivating to pay attention to your numbers as they change.
#14 Check your credit report annually
Per federal law, you can get one free report per year from annualcreditreport.com.
#15 Build good credit
Follow these easy tips to build and maintain a good score.
#16 Live below your means
It matters more if you can spend less than you earn than what you actually earn. As you get raises, try to put 25% or more of them away into savings before you even see them, that way you increase your savingsrate before you even feel the difference.
#17 Wittle down any debt
You may already have some student loans, a car loan, or other personal debts already accmulated. Give yourself a head start by paying down as much as you can now--especially if you are still in an interest-free grace period.
#18 Strategize your career
Now is a great time to start building relationships through career networking, building in-demand skills, and learning about industries that pique your curiosity. You don't have to pick one field and stick to it. Right now is a great time to experiement, learn, and stretch youself to reap the benefits as you go!
#19 Be a forever learner
With finances affecting every other area of your life, it pays to know more! Whether it's picking up a money how-to book from your library, taking an online class, or booking a free coaching session with one of our certified financial coaches for a more tailored-to-you experience, challenge yourself to keep growing.