Budgeting for young adults is no easy task. In this post I’ll share some stories from my time trying to get my feet established as an adult (like how I started 70k in debt) and share 5 tips that I believe will set you up for success in the future.
I remember those first several months right out of college. Life was a bit of a blur. Everything seemed so simple yet so complicated. It was simple because I just needed to worry about my wife and myself for today. I wasn’t thinking into the future. I wasn’t planning my life out.
It also seemed complicated because there were so many things I didn’t know. I was so early on that I didn’t know what I didn’t know.
Specific to my finances, my mindset and processes have changed so much. I still run across some of my old budgets from that time and man have I made progress. I know you can too. As I think through that stage of life I’ve put together a few keys to financial success.
Before we dive too deep I wanted to point you to specific resources that I think will help you out:
Budgeting for young adults: Live like a college student
Budgeting for young adults can be difficult. However, if you just live like a college student you’ll make your life so much easier.
I budget for two reasons. The first is to ensure my household spending aligns with my priorities. The second is to avoid lifestyle inflation.
While your overall spending may be low, the largest increase in your living expenses may be when you become an adult. This is partially due to not being in college and/or living with your parents. The other reason is because you now don’t have anyone looking over your shoulder and you feel you can spend what you want.
If you only take away one thing from this post its to keep living like a college student.
Keep your expenses low! The longer you can do that the longer you’ll avoid lifestyle inflation. To a certain extent I think its inevitable as you start and possibly grow your family but fight it like the plague.
Avoid major purchases
It would be so easy to go out and buy the new iphone, upgrade your car and maybe even buy a house. I strongly caution against all these things. Once you start upgrading your car you’ll need to upgrade your wardrobe to match. If you have the new car you may want the new rims or other accessories.
Upgrading your life is so expensive and its rare for someone to only upgrade a portion of theirs. Its usually an all or nothing experience and its one you need to avoid.
Keep driving that old car. Keep your housing expenses as cheap as you can. These are the paths to financial success.
Build for and protect your future
One of the best things you can do while you are young is to either avoid or paydown debt. You never want debt to have a stranglehold on your budget. Just like lifestyle inflation, the longer you can avoid it the more you will dampen the long term effects of it.
To protect your future also means setting aside some savings for an emergency fund. If you are going to avoid debt you are going to need some money to turn when an emergency happens. Avoid debt and set aside some cash!
Don’t worry about investing outside of retirement
If you read any blogs or books they’ll say you need to invest, invest and invest! When you are getting your feet underneath you and keeping in mind you are budgeting for young adults, you don’t need to worry about this.
Any extra cash you have just put into a savings account. I’ve previously covered some of the options for storing this money away. Your focus should be on putting money away. You can deal with what to do with it later on.
Take advantage of your company benefits
Too many people have no idea what there company benefits are. Those benefits are valuable and can add up to a significant amount of money each year. Budgeting for young adults is not an easy process and everything adds up.
Dive deep into any and all benefits. There will hopefully be something on the retirement side of things as well as for your health. Its important to know these benefits backwards and forwards and to take advantage of all of them.
Those are my 5 keys to budgeting for young adults. You can see that the budgeting part is actually pretty easy if you have the right long term mindset. At this stage of life its not so much about the actual figures as it is about your willingness to sacrifice and set yourself up for success.