Striking out on your own as an adult comes with a swirl of emotions. With more freedom around your financial choices, the question of how to adult comes with more pressure. We understand the struggle, which is why we came up with an adulting 101 guide for your finances.
Because taking care of yourself is more than simply finding an apartment to call home. You also want to excel in your career without losing your friends. Plus, the long list of financial things you should be doing can be a constant worry.
After all, who has time to eat healthily, maintain a budget, and nail down the appropriate insurance policies? It seems like you have a never-ending to-do list. Luckily, it doesn’t have to feel like that. Instead, you can take charge of your finances to tame at least one area of your life.
Adulting is hard..but is it really?
Sure sometimes adulting is hard, but learning adulting skills can make it so much easier! For instance, some people weren't taught about finances as children, so they may feel that adulting is hard because they simply weren't taught how to manage their money right.
This results in overspending, not being a savvy shopper, or not knowing how to budget. However, just because you may not know these skills now doesn't mean you can't learn them. A big part of adulting 101 is learning as you go! So, let's dive into how to adult.
Adulting 101: How to get started
A key step in adulting 101 is getting your financial house in order. If you are avoiding working on your finances, then it's time to tackle them head-on. Whether we like it or not, money has the power to dramatically influence our lives. A properly managed balance sheet can lead to lower stress levels.
Since long-term stress can lead to serious medical conditions such as heart disease and high blood pressure, it is important to take this seriously. With that, taking the time to sort through your finances is critical.
Although taking that first step towards understanding your finances can be scary, the long-term effects are worthwhile. If you can change course now, then you have the opportunity to end up in a better financial position down the road. So here are steps to help you learn how to adult when it comes to your finances:
1. Find your reason
The first step in adulting 101 is to find your reason. It is easy to say that you want to start effectively managing your finances. It is an entirely different thing to follow through on that intention. I’m not going to lie; getting a handle on your finances can be a time-consuming process.
However, the time you put in can dramatically change your financial position for the better. So, what makes your life worth living? Think about the people and goals in your life. Maybe you are a newlywed with plans to start a family. Maybe you want to take your dog on a trip around the world before you turn 30.
Or maybe you simply want to have enough money in your bank account to break the paycheck to paycheck cycle. Whatever your reason, hold on tight. Organizing and cleaning up your finances might be a long process. Whenever the going gets hard, think about your why and just keep moving in the right direction.
2. See where you stand
You cannot move forward before you know where you stand. That would be similar to building a house before pouring the foundation. Take stock of your financial situation. First, track your spending and your income. It is critical that your income is more than your expenses.
Next, calculate your net worth by subtracting your liabilities from your assets. If you’ve found a positive number, congrats! If you’ve found a negative number, that just means you have a little bit more work to do.
No matter what you find, it is important to be brutally honest in this step. A bleak financial picture cannot improve if you ignore the problems.
3. Determine where you want to be financially
After you’ve taken stock of your financial situation, it's time to dream. Where do you want to be financially? First, think about your long-term goals. Do you dream of retiring at some point? Make sure to prioritize your retirement savings now. You can reap the rewards of investing while you are young.
Next, think about your short-term goals. Are you focused on saving for a downpayment on a home within the next few years? Do you plan to upgrade your ride to a brand-new car soon? Is an expensive trip the next stop on your bucket list?
The best part is that there is no right or wrong type of financial goal. You simply need to be honest with yourself about these goals.
4. Make a plan to become a financially responsible adult
Once you have a better understanding of where you stand financially, it is time to move forward. Take a look at your goals and set up a timeline for when you want to reach them. It’s okay to have an aggressive plan but remember that good things often take time.
Tackle your financial game plan one step at a time. Don’t let yourself get overwhelmed. You can dramatically improve your financial picture by following a simple plan. The focus here is to become financially fit and fiscally responsible! Planning your finances is another important step in adulting 101.
5. Get on a budget
As you start to take your finances seriously, it is time to lock down your budget. Are you spending every penny you bring in? Do you know how much you are spending each month? It’s important to get a handle on these numbers.
Start by tracking your spending
One way to do this is by tracking your spending for a few months. Find out how much you are spending in each category. You might be in for a surprise. The regular meals out can add up very quickly. After you have an idea of what you spend each month, it is time to set up your new budget.
You can make a budget with specific allocations set up for each month based on your spending goals. It might include strict categories such as food, gas, toiletries, and more. However, this can feel restrictive to many people. It is effective if you are a master at self-discipline, but unfortunately, I’m lacking that department.
Choose the best budgeting method for you
My budgeting strategy is a reverse budget. Instead of deciding how much I will spend in each category, I decide how much I will save upfront. For example, you may decide to save 25% of your income.
If you make $50,000 a year, then you will set aside $12,500 each year or $1,041 monthly. You’ll be free to spend the rest of your income without worrying about hitting your savings goals. Personally, I find the second strategy more effective because I am less likely to overspend. However, the method you choose will vary based on your personal strengths.
Learn to love budgeting
Remember, living on a budget is not a bad thing. In fact, it can be freeing. You no longer have to worry about whether or not you can afford to treat yourself because your budget will let you know.
Sticking to a budget can help you to know exactly how much you can spend in order to meet your savings goals. Find a budgeting method that works for you! Budgeting your money is a huge part of adulting 101.
6. Build an emergency fund
After you get your budget under control, the next step is to build an emergency fund. Life happens. If you haven’t already run into a major financial emergency, then you likely will at some point.
Emergencies can come in many forms. A major car repair, an unexpected medical expense, or a job loss can all lead to serious financial headaches. Building an emergency fund can help to alleviate the financial stress of an unexpected situation.
In most emergencies, you would rather focus on the problem at hand instead of wondering how you are going to pay for it. With 3 to 6 months of expenses on hand, you’ll be better prepared to tackle whatever life throws your way.
7. Pay off your debt
Debt is a burden. There is no other way to put it. Whether you have student loans or mounting credit card debt, you’ll want to act on this fast. Not only is a debt payment a drain on your monthly balance sheet, but it is also a dampener on your financial future.
Imagine if you could save a few hundred dollars each month instead of throwing it at a student loan. Over time, those monthly savings will lead to a healthy nest egg. If you have debt, then make it a priority to eliminate it. Learn more about debt repayment strategies and how to get started.
Adulting 101: Prepare for the future
Part of learning how to adult is to look past today. You’ll need to plan your financial goals for the future. One way to set up a great financial future is to take charge of your finances today. Here are a few more ways you can start to set up a bright financial future.
1. Build and maintain good credit
A credit score is a three-digit number that can have a big impact on your life. With a high credit score, you’ll have access to better loan terms for future large purchases.
For example, if you plan to buy a home one day, then you’ll need a good credit score to lock down the best rate. Borrowers with low credit scores are less likely to be approved at all. Even if they are approved, they will pay a premium for that privilege.
You can potentially save thousands of dollars on big purchases, like your future home, by improving your credit score. Take action today; your future self will thank you!
2. Start investing
Although you have likely heard this advice one hundred and one times, it bears repeating. Investing your money while you are young is absolutely critical. When you start to invest your money at a young age, it has more time to grow. That growth can lead to an impressive investment portfolio.
Even if you only have a little bit of money left over each month to invest, make that contribution. You have a few different options when it comes to investing. A good place to start is checking to see if your employer offers a retirement account or a matching contribution.
If there is a match, then make sure to contribute at least that amount. Match money is basically an immediate 100% return on your investment, which is unbeatable. If you aren’t sure where to get started, then check out our course on stock market investing.
3. Think about insurance
A vital part of adulting 101 is getting properly insured. Until this point, you’ve likely only paid for healthcare insurance and car insurance. As you test the waters of adulthood, it is time to rethink your insurance needs. Here are some main types of insurance you need to ensure you are properly covered:
If you have any dependents, then you need to think about life insurance. Otherwise, they could be left in a bad spot if something happens to you. It's important to compare different life insurance policies to ensure you have the right coverage for your family's needs.
If you are renting your home, then you should consider renters insurance. You have things worth protecting, like your laptop or a nice TV. If anything from your apartment got stolen, your landlord will not help you cover that expense.
Even if you feel that you have nothing worth insuring, renters insurance can protect you from liabilities. Let’s say you accidentally cause some major damage to your rented digs; the landlord will expect you to pay for that. Renters insurance can save you from a potential legal headache if the unexpected strikes.
Another form of insurance that most people overlook is long-term disability insurance. In the event that you are unable to work due to a disability, your income would be replaced by this insurance. You never know what life holds. Long-term disability insurance can lead to peace of mind that is worthwhile.
Finally, if you have a pet, then you need to consider pet insurance. Our furry friends are known for getting themselves into trouble. For example, my friend’s dog recently rummaged through the trash can for a tasty corn on the cob.
That story ends with a trip to the vet and an outrageously expensive surgery. Don’t let that unexpected expense blow your savings goals for the year; get insurance instead!
4. Focus on your career
Excelling at your career is one way to boost your income. That money can be thrown to propel you to your financial goals faster. Starting from the bottom of the ladder at work can be frustrating. You know that you have talent, but you’ll need to put in long hours to reap any rewards. If your career is important to you, then make it a point to stand out from the competition.
You may want to consider investing in your career through continuing education courses. If graduate school is in your future, then check out the opportunities that your organization offers. Many large companies offer to pay for your higher education if you meet certain work goals.
5. Invest in yourself
Investing your money into long-term investments is not enough. You should also invest in yourself. Perhaps a graduate degree might be the best step to increase your earning potential. Do you have a business dream that you have wanted to make a reality?
Make it happen through investments of energy and money! Although there are many ways to invest in yourself, choose a path that will bring you the most happiness.
Adulting skills to develop that can help your finances
So, now that you have the rundown on how to adult, there are more adulting skills you can develop that will help make your daily life easier and improve your finances.
1. Learn how to cook
There are tons of yummy recipes on Pinterest that can help you come up with tons of meal ideas that are budget-friendly. Also, you can watch videos on YouTube to learn how to prepare meals too!
2. Learn how to communicate effectively
The ability to communicate effectively is important in all aspects of your life. Communication affects your relationships, career, and finances. For instance, being able to speak with your boss about getting a raise or promotion can affect the outcome.
Knowing how to express yourself professionally can make or break your career. It's also important to communicate with your partner lovingly, whether about financial topics or other areas of your life. Learning to communicate is a big part of adulting 101.
3. Learn how to say no
An important skill in adulting 101 is knowing how to say no. If you're a people pleaser, then learning how to say no is one of the most important adulting skills you can develop. Saying no can prevent you from overspending when you go out with friends and helps you set financial boundaries with yourself and others.
It's not being mean if it's in your best interest financially. So start saying no to situations that can damage your financial wellbeing.
4. Learn how to negotiate
Negotiating can save you tons of money. You can negotiate prices when you buy a house or car, which can save you thousands of dollars. If you shop for preowned items, you can save money simply by asking for a discount.
Learn how to negotiate so you don't overpay for items and can keep more money in your pocket!
5. Learn how to balance a checkbook
Since we live in a digital age, it may seem like knowing how to balance a checkbook is becoming obsolete. However, that couldn't be further from the truth. It's super important to your budget that you track your transactions and balance your bank account to ensure you don't overdraft your account and aren't being overcharged for items.
So dust off that check register and start tracking your transactions to get a firm handle on your finances.
Use our adulting 101 guide to get your finances in order!
Adulting is hard at times but it doesn't have to be when it comes to your finances. You will need to make an effort to go through the steps. That effort will translate into long-term financial well-being.
If you want to wake up in a better place financially in 6 months, then you need to take action today. Get started with our completely free financial courses and worksheets!