• Adulthood comes with exciting new freedoms and some financial responsibilities. 
• The most important money tip for young adults is that creating good habits at a young age will set you up for financial success. 
• After you have the basics down, keep furthering your education around budgeting, saving, and investing. 

Welcome to adulthood! While there are many freedoms and opportunities to look forward to over the next several decades, you’ll also face some essential responsibilities if you want to ensure your financial well-being. By starting young, you can establish healthy money habits that will help you for the rest of your life. In this blog post, we’ll explore critical financial habits and actionable tips to help you achieve financial security and success.

Start With A Great Budget

Budgeting is the most important money skill you need to learn. Whatever you want to do with your money, managing it through a budget can help you reach your goals. 

There are five main steps involved in budgeting: 

1. Calculate your monthly income: This is how much money you bring in from work or other sources. 
2. Track your spending: If you link your bank account to your Payactiv account, you can access your tracked spending in our app. 
3. Set short-term and long-term goals: Short-term goals include saving for a vacation or paying off a credit card. Long-term goals include saving for a home down payment or investing for retirement.
4. Cut your expenses: Are there any spending areas you could reduce? Whether it’s buying fewer lattes or shopping around for better rates on insurance, look for ways to reduce your monthly expenses.
5. Review your budget regularly: Once you’ve written your budget, the real work begins. Review it monthly to ensure your savings and spending align with your goals. Remember that your budget is not written in stone. You can switch things up until you find a solution that works for you.

Save an Emergency Fund

An emergency fund is one major line item every budget should include if you don’t already have one. Life happens, and it tends to happen at the most inconvenient times. An emergency fund helps protect you from financial ruin when unexpected expenses arise.

Generally speaking, a healthy emergency fund is between three to six months of expenses. However, saving this much money can be intimidating when you’re starting at zero. 

Starting with smaller goals can build momentum and confidence. Start with a goal of $1,000, setting aside as little as $20 per pay period. Saving money automatically is crucial to remove the burden of remembering to save. You’ll be surprised at how quickly you can build your savings to a healthy amount. 

Pay Off Debt As Soon As Possible

Whether you have student loans or a credit card balance, paying down debt is necessary for financial adulting. Debt almost always comes with interest. The longer you take to pay it off, the more interest you’ll incur. 

There are two main methods for paying off debt: 

1. Debt snowball method: Write down your debts and their corresponding interest rates. Make the minimum payments on all debts, but throw any ‘extra’ money at the highest interest debt. Once it’s paid off, use the money you were paying on that debt to pay off the next highest-interest debt. Repeat until all debts are paid off. 
2. Debt avalanche method: Write down all your debts and their corresponding balances. Make minimum payments on all your debts, but throw any ‘extra’ money towards the debt with the smallest balance. Once it’s paid off, use the money you were paying on that debt to pay off the next smallest debt. Repeat until all debts are paid off. 

Mathematically speaking, the debt snowball method is best. This method will help you pay the least amount in interest, saving you money in the long run. Psychologically speaking, the debt avalanche method works for more people. The small wins you get early on by paying off those small debts can motivate you to keep going until you’ve paid off the larger ones.

Shop for Insurance

Adults need insurance. It’s important to determine your needs and budget, such as the type of coverage you need and how much you can afford to pay for premiums.

Don’t forget to read the fine print and understand the terms and conditions of the policy, including the deductible, coverage limits, exclusions, and other important details. Consider bundling multiple types of insurance with the same insurer to get discounts on your premiums. However, don’t sacrifice coverage for a lower price.

• Health insurance: If this isn’t offered through your employer, you might be able to get Medicaid depending on your state and income level. During open enrollment, you can also shop the ACA marketplace for subsidized health insurance.

• Auto insurance: If you drive a car, it’s illegal not to have auto insurance. Call at least three different insurers to get quotes to get the best rate and coverage for your needs. Alternatively, let Payactiv find the cheapest car insurance rate for you when you download the free Payactiv app¹.

• Homeowners or renters insurance: You’ll need homeowners insurance if you own a home. If you rent, getting renters insurance is a good idea, even though it might not be required. Renter’s insurance premiums are cheap and even more affordable if you bundle coverage with your auto insurance policy.

Remember to review and update your policy regularly to ensure that it continues to meet your changing insurance needs.

Invest for Your Future

One of the most powerful ways to build long-term wealth is by starting your investing journey young. The longer your money is in the market, the longer it has to earn compounding interest. 

Investing just $300 per month starting at age 20 could lead to more than $1 million at retirement. Don’t forget to do your own research and speak with an investment professional for more information.

Keep Learning

To achieve financial stability, it’s crucial to build a practice of learning about finances. Personal finance is personal, and financial literacy is a continuous process, not a one-time event. As you face new financial situations, you’ll need new money management skills to adapt and make informed decisions. It can also help to talk to a personal finance expert. You can get free financial coaching through the Payactiv app for customized financial guidance. To stay on top of your financial education, download the app in your app store and access a wide range of resources and tools to monitor your finances and improve your financial knowledge.