Young people are used to living on a tight budget but once you start climbing the career ladder, you should have a bit more money to play with. That’s great and it should take some of the stress off, but it’s important that you’re making good financial decisions as you start earning more so you don’t end up in a bad position later in life.
It’s tempting to just increase the amount that you spend on luxuries because you’ve got the money there, but if you do that, you’ll just end up living month to month and you’ll never be financially secure. If you’re starting to earn more money, you should read these financial tips for young professionals.
Watch Out For The Small Expenses
When you’re trying to budget your money, it’s fairly easy to avoid the big expenses. You’re not going to travel or spend loads of money on expensive restaurants if you can’t afford it, but those aren’t the expenses that catch people out. It’s the smaller expenses that add up over time that will stop you from budgeting effectively. For example, if you’re a working professional and you don’t have much time on your hands, you might grab a coffee and some breakfast on the way into work. It doesn’t seem like much but when you add up the cost over the course of a year, it’s A LOT of money. But if you buy food in and make a quick breakfast before you leave the house, you’ll save a lot of money. Try to be aware of these small purchases and always ask yourself whether you need to spend the money, no matter how little it is.
Get Renters Insurance
So many young professionals are renting their house instead of buying because they simply can’t afford to save for a deposit. But a lot of people don’t realize that you should be paying for renters insurance as well. The best renters insurance will cover you in the event of theft, fire, water damage, and vandalism. You might think that you don’t want to pay the extra expense but you’ll regret it if something happens and you have to pay to replace all of your possessions.
Learn About Taxes
Taxes are an unavoidable fact of life and once you start working, you’ll have to start paying them. But nobody really teaches you about that stuff when you’re younger so it’s important that you learn the basics. If you don’t understand how much money you’re being taxed, you won’t have a real idea of how much you’re earning. You might get a job offer with an attractive salary, but it’s important to think about what you’ll actually be left with once your taxes have been taken off.
Start Thinking About Retirement
While it probably seems way too early to start thinking about retirement now, but it’s not! I can’t be the only one imagining spending my retirement days at a cottage reading a good book, but it’s important to remember that the earlier you start saving, the easier it’s going to be. You don’t need to put that much aside but if you start putting small amounts into a retirement fund, you can start earning interest on it. Compound interest (the interest you get on interest) will create a snowball effect over the years and you can start building a solid retirement fund. If you leave it too late, you’ll have to put large amounts aside to make sure that you’ll be financially stable once you retire.
If you can get into good financial habits now while you’re young, it will be a lot easier to manage your finances later in life.
*This is a collaborative post.