Young Americans are finding it harder than ever before to make ends meet, let alone achieve the American Dream. Generation Zers are financially crippled by the cost of attending college, which has increased eight times more than wages over the past 30 years. Budgeting for young adults is essential as paying for healthcare expenses is otherwise out of grasp for many young America
Is accessing treatment for illness or a medical emergency something you worry about? If so, you’re not alone as 81% of Gen Zers believe that spiralling healthcare fees are one of the greatest barriers to reaching financial independence.
With homeownership rates also low, and young people failing to enjoy the standard of living offered by their parents, the financial outlook is bleak if you don’t take the initiative to change your circumstances.
The positive news is that by following some simple budgeting ideas for young adults, you can completely transform your financial future.
Check out these top five money-saving ideas and put an action plan together today.
Budgeting for young adults requires financial literacy
Before looking at ways to trim your budget and help you save towards financial independence, it’s essential that young people are familiar with personal finance education.
Unfortunately, US teenagers aren’t taught about financial literacy for young adults in high school which leaves a gaping gap in their economic understanding once they come of age.
Only 15 schools in the entire country require pupils to take a one-semester personal finance course prior to their graduation, according to NextGen.
Although schools could and should be doing more, you can gain a wealth of information on budgeting for young adults by self-learning via free online resources such as those offered by The Finance Hub. And it’s never too late to start!
Learning about personal finance may seem overwhelming at first, which is why it’s important to take it one step at a time.
Begin by understanding the basics of budgeting and managing your cash flow.
You might then progress to exploring a little about how stock market investments work and the notion of compound interest.
Even though there is an undeniable gap between advanced personal financial literacy and economic opportunity in America, the truth is that any young person with access to the internet can learn the basics of making a budget and investing their savings into a pot for the future.
From reading articles, watching YouTube tutorials to registering for free online seminars it’s easy to get started today.
Keeping track of your finances
Once you’ve grasped the basics of young person finance, it’s time to get a grip on your earnings and outgoings so you can view the entire picture.
Many young Americans have a bank account, possibly a savings account, federal student loans, credit cards, auto loans or store cards. It’s hard to keep track of your income and expenditure if you have various figures spread across several financial institutions or products such as these.
Your bank balance might say $500 dollars, but if you have two credit cards each with $300 on them, then it’s easy to be optimistic about the figure showing in your current account and avoid the realisation that your overall position is -$100.
One of the best budgeting ideas for young adults is to download a simple money management tool to your phone, tablet or desktop which allows you to keep track of all your incoming earnings and outgoing expenditure, as well as your debts and savings.
As soon as you’ve linked and verified your accounts, you can expect to view a consolidated snapshot of your overall financial picture, with transactions updating in real-time, so you never have to wait for your true position.
You can also manage your bills, recurring payments such as app subscriptions and make transfers as required all at the touch of a button.
Popular money management apps include Mint, Zeta, Simplifi by Quicken and Pocketguard.
Learn how to manage your debts
If like many Gen Zers, your financial picture is far from encouraging, then don’t despair. Remember that you’re in this for the long term and that the path to financial freedom is about making small, simple changes which can start taking effect from today.
Use your money management app to gain a thorough look at your finances. There are two main areas to focus on, namely your incoming funds and your outgoing expenditure.
If you have already acquired debt, then the interest charged on your credit cards or loan payments could be eating into your budget considerably.
If your debt is spread across multiple loans, then debt consolidation is essential in reducing the amount of interest you’ll pay overall.
Where possible, switch all your debt to a 0% interest, balance transfer deal which will mean you don’t pay any existing interest for a fixed period of usually a few months to a year or more.
This will allow you to focus on paying down your debt without the costs spiralling out of control.
To pay down debt fast, first, stop using your credit cards, and pay off as much as you can afford each month.
You may need to make cuts to other spending to attack your debt pile hard, doubling up on payments where possible, and using any bonuses or windfalls to pay down the amount further.
If debt isn’t yet a problem for you, then you might be asking whether or not you should apply for a credit card. There are some advantages to applying for your first credit card, so long as you don’t abuse it.
By doing so, you’re beginning to build a credit history, which will be important years down the line when you come to buy a house or even a car.
Purchasing items on credit cards also offer buyer protection in comparison to other payment methods.
However, using credit cards is only really useful if you’re one of the 40% of Americans who pays the balance in full every month.
If you’re unable to do this, then this could have a significantly negative impact on your future personal finances.
Reducing your outgoings
Debt certainly isn’t the only outgoing expense facing young Americans. With homeownership low, the alternative is to stay at home with parents or rent accommodation elsewhere.
But with the cost of renting having risen faster than renter earnings for more than 20 years in a row, this is an uncomfortably expensive situation to be living in.
Reducing outgoings to make ends meet and afford your rent is critical for Gen Zers, but the positive news is that there are numerous ways to live a more affordable lifestyle.
Create some simple budget categories such as groceries, transport, entertainment etc and then adopt frugal swaps including the following budgeting ideas for young people:
- Walking or cycling to work instead of driving
- Eating at home or taking a packed lunch instead of eating out
- Ditch your landline and stick with your mobile
- Upcycle your furniture instead of buying new
- Shop at pre-loved stores instead of paying full price
- Stop buying tickets for leisure facilities and embrace free entertainment instead
- Start freezing meals to avoid wasting food
- Eat less meat and switch to a plant-based diet to save money
- Grow your own fruit and veg at home instead of expensive store-bought alternatives
Once you’ve realized how simple it is to make these frugal changes, you’ll be inspired to cut back across your entire budget. Using a budget template for young adults can assist in identifying and sticking to these changes.
Starting a side hustle
At the same time as cutting back on your expenses, you should be looking at boosting your income to maximize the amount you have left in your account at the end of the month.
2021 may not be the most realistic time to ask for a pay-rise if you’re in employment, as companies are struggling to keep afloat during the pandemic.
However, that doesn’t mean you have to sit back and wait for the overall economy to pick up.
Instead, how about starting a side hustle and make additional income in your spare time? Whilst there are numerous examples of successful businesses which have been launched against all odds during the pandemic, you may not feel ready for this type of a leap.
Instead, with the relevant set of skills, there are plenty of ways to make easy money online if you’re willing to freelance.
From copywriting, graphic design and computer programming to bookkeeping, proofreading and transcription, it’s easy to get started on earning money in these fields with low to zero start-up costs.
All you need is a computer, internet connection and access to a freelancing platform such as Upwork, Freelancer or Fiverr for you to promote your services on.
If you don’t have any of these skills, then how about tutoring, delivering food or even becoming a handyman in your local area? Any of these jobs can fit into your own personal schedule, leaving you free to pursue your college studies, part-time or full-time work at the same time as your side hustle.
Get started today
However new you may be to the world of personal finance, there’s no time like the present to get started with making positive changes and get your money management on track.
For more information on budgeting for young adults, along with our extensive collection of quick financial tips and articles, please check out our blog today.
