High school and university are places of great learning… it’s just unfortunate that a lot of the basics about money or any financial tips aren’t taught there!
There’s one sad and harsh reality we all have to admit at some point in our life: we have to grow up.
Whether we like it or not, we all have to jump from being a carefree teenager or college student to that of a “responsible” adult. Some of us might go kicking and screaming, but eventually, we all get there.
Through this transition, there are A LOT of life lessons and despite how much you plan or prepare, some will always sneak up on you.
For some people, it’s the harsh realities of getting a job. It’s the office politics, the need to balance a schedule and for once getting up before 8 AM 🙂 For others, it’s about finding your new identity. It’s about who you’ll be now that you’re out of school, and what you want to do for the rest of your life.
Pick your poison… there’s tons of valuable lessons to be had as we transition into adulthood. Personally, I’d argue the most significant lessons we face at this stage of life are money-related.
Many of us don’t learn much about money until after college
How many times did you formally sit in class and learn about money or personal finance in school? If you’re like the average student, my guess is not many.
According to Business Insider, most US high school students don’t have to take a personal finance class ever!
That’s a tough pill to swallow when you think about how the world of personal finance is changing so rapidly. Interest rates are starting to rise for the first time in a decade, new “investments” like cryptocurrency are emerging, and it feels like you can get credit just about anywhere for the right price.
And you don’t have to look far to see the consequences…
In the same article, we see that only 24% of millennials describe themselves as having “basic” financial knowledge and 70% are already stressing about saving for retirement!
That’s scary stuff.
It’s not hard to see that we can do a lot more to educate ourselves on the basics of money at a younger age.
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So what are the top financial tips for young adults?
While there’s no shortage of money topics out there, there are a few ESSENTIAL ones everyone should know. The goal of the rest of this post is to share with you some of the top financial tips for young adults. Being armed with a couple of these will make a HUGE difference in how you manage your money.
Financial tip #1: Invest early (you don’t need $1,000’s to start!)
One of the biggest lies out there is that you need a good-sized nest egg before you start investing. Nothing could be further from the truth!
One of the most important financial tips for young adults is to start investing early and consistently.
Investing is not a short-term game… that’s gambling. By being in it for the long haul, you can see BIG gains over time. That makes starting early even more important. Starting early also allows for you to ride out any “waves” the market may have. You won’t make money every day in the market, but if you ride it out over the long-term you’ll do ok!
It’s also important to be consistent when you invest. Doing so means you’ll always be adding to your investments… meaning they’ll grow over time!
Financial tip #2: Buying a house has a lot of extra costs
Sure, we all know buying a house can be expensive… especially as prices continue to rise! But only after you purchase your first home do you realize what’s all involved in the process.
There is a lot of money being exchanged when purchasing a home. There’s lawyers. There’s realtors. And there’s home inspectors. Land Transfer Tax. All of which have fees. There are also ongoing housing costs you need to think of – electricity, insurance, and repairs to name a few. Many people today are still in the dark about these expenses.
You have to be careful the excitement of purchasing your home doesn’t cloud all these other expenses that can come up! There are so many people who believe that buying a house and calculating affordability is just about the purchase price of the home. You need to include all the costs when you see what you can afford!
There’s also no lessons taught in class on how to save for a down payment, how different rates affect your payments and even when you should rent or buy. All of these things you should think through.
Related post: The upside of downsizing your home (before retirement)
Financial tip #3: Networking is very important
On a slightly non-financial note… or indirectly associated with money is the topic of networking. I’m including it on the list because networking can greatly influence how you navigate your career and therefore affects your finances.
It was never introduced as a topic and no one ever really talked about how to do it or the IMPORTANCE of it in high school. Once you get into the working world, you realize that many (not all) opportunities are created or found through networking. It’s through talking to that one person who planted an idea in your mind or that one colleague who knew of an opening that can “create a way” for you.
We have all been taught to get along with others and to play nice but networking is different. It’s more complicated than that.
Yes, you should be nice to everyone but networking is almost like a science and art at the same time. You don’t want to be too eager and seem like you are trying too hard. But you also want to build professional relationships and grow your brand which is YOU.
This is different from making friends when you’re a child or teenager. You need to be comfortable talking to people you might not know very well and build a genuine mutually-beneficial relationship. You can’t just go “go after” someone in a self-serving way. Like I said, it’s both an art and a science… and I wish I learned about it earlier!
Financial tip #4: You should always try to negotiate your salary
This financial tip is directly associated with what you make and is so important! It could mean thousands of dollars of difference in your net worth! It could mean saving sooner for retirement or paying your mortgage/loans off faster.
Should you always negotiate your salary when you start a job? The short answer is yes!
This skill is especially crucial as millennials continue to dominate the workplace. Gone are the days where you stay in one job or one company forever and ever.
Sure, you need to be respectful of each and every situation, but when approached the right way it’s not that “taboo” of a topic. In fact, the majority of employers are expecting you to at least ask.
How you do it is important though. And this type of training is not taught in school. It’s a form of art really.
You can’t just march into an office and give your demands. You have to be educated, and there has to be flexibility and compromise in the process.
What’s the norm for your industry and experience? Is there future potential to develop your skills? Is there an opportunity for future promotion? What types of levers do you have to negotiate? And what’s non-negotiable? All of these are things you need to think through.
You also have to take into account the bigger picture when negotiating. It’s not just about the final salary number. There are other things that you can negotiate that may add to your bottom line. Things that can be often negotiated include vacation time, bonuses, sick time and health benefits.
For example, if your employer offers you $50,000/year plus three weeks of paid vacation and decent benefits it may be better than $65,000 with only two weeks of paid leave and no benefits. It’s a big equation at the end of the day with several variables you can play with!
Related post: Why a high income doesn’t guarantee financial freedom
Financial tip #5: You should find yourself a mentor
This should have been a class itself! While not directly tied to your finances, I think having a mentor produces benefits long-term that can make you a better person… this includes being better at your job, better in your community and better in other relationships. All of these can impact your finances in the long run.
It’s one thing to have a good role model and someone you look up to, but it’s another to have a mentor who’s pouring into your life and offering guidance.
Finding a good mentor is so difficult to find, and if it was part of the curriculum in school, then perhaps, different relationships might grow. Or at least the process of engaging with a mentor might be easier.
I’ve been blessed to have been brought under other leaders’ wings over the course of my career. Without them, I genuinely think I wouldn’t have developed into who I am today. People over the years have given me feedback on everything from leadership skills, to presentation skills to even relational skills. Without this mentoring, I can safely say I wouldn’t be where I am in my career (which obviously has a financial impact).
My wife is also going through the same thing now having gone back to school in another field. She’s learning from people who have gone before her, in hopes of learning what to do and what not to do.
For all those who don’t have a mentor yet, I’d encourage you to find three people you trust and look up to, and build a good relationship with them. I’d target two within a similar working environment as you, and one outside of your field to provide a broader perspective. Start with casual coffees, but make the mentoring formal by setting up regular touchpoints for “focused mentoring.” Don’t be shy, and be open and honest about what you need help with. Without being truly honest you won’t be able to improve!
And while we are on the topic, find someone that YOU can mentor. There is always someone who looks up to you (even if you don’t know it). We all have skills that we can share. Is there a co-worker who is newer and could use some advice? Is there someone in your life who you think could benefit from your experience? Wisdom? Guidance? Pay it forward to others as well.
Financial tip #6: Understand compound Interest
Now before you roll your eyes, this is the MOST IMPORTANT lesson about money you could ever learn. Compound interest can either cost you money or make you money. You want to make sure you’re on the right side of that equation!
I found that MoneySense does a really good job explaining this.
It’s how your savings grow faster the longer you leave them alone. Whatever you save—whether it’s in an RESP, a savings account or an RRSP—earns interest not just on what you put in, but also on the money it picks up along the way. — MoneySense
As you can see in the chart above, the growth from 0 to Year 1 is $50, while the growth from Year 1 to 2 is $75. This extra bit is due to the “compounding” of interest. Now, this can work for you or against you.
When you invest in something that compounds over time, you can make a lot of extra money by doing nothing! When you borrow something and don’t pay it off though, you end up paying more over the long run. So next time you put something on that credit card, be sure to pay it off!
Related post: Learn how to pay yourself first and save more money
Financial tip #7: Taxes are important (and not just for math whizzes)
The word “taxes” is one that makes people cringe. It just doesn’t sound fun at all!
In all honesty, though, it’s not hard to know the basics, and you can save a lot of money with proper planning. You NEED to understand what you have to claim, and what you can deduct. Doing so can help you save $1,000’s every year.
The good news is there are now a lot of free (donation-based) or cheap online services that help you do your taxes efficiently. My wife and I started using Simple Tax. This thing is a goldmine! If you’re in Canada, I’d highly recommend it. A team of 3 built a free online tax program that’s donation-based. They have a 100% accurate guarantee, meaning if for any reason there’s an error, they will pay any interest charges or penalties. HOW AWESOME IS THAT! They also guarantee to maximize your refund using all possible deductions. DOUBLE AWESOME!
The U.S. also has a bunch of similar options (covered in this post), but I personally haven’t used them.
The reality is that becoming an adult can be tough – there are no two ways about it. No matter how well you do in school, sometimes there’s just no textbook for what you need to know. My hope is that these financial tips have been helpful and that you can add them to your own “financial tool belt.” If you have any others you know that might be helpful, feel free to share in the comments below!
Think it through
- What do you still struggle to learn? Is there a course you can take, or additional help you can get?
- What’s stopping you from learning more about personal finance?
- How can you share your new learnings with others?
- Learn how to pay yourself first and save more money
- The high cost of waiting to invest – why are you waiting?
- The upside of downsizing your home (before retirement)
- Why a high income doesn’t guarantee financial freedom
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