A new generation of adults is entering the real world, and there are a few things they can do to make sure they’re ready for the transition to financial independence.
It’s Time to Move Out: Now What?
Moving out on your own for the first time can be a scary undertaking. When you’ve spent your whole life being cared for by someone else, realizing it’s time for you to support yourself can be overwhelming.
Get Ready for Your Financial Future
With the right preparation, you can set yourself up for success. Your financial security is a great place to start.
Set a Budget
Learning to budget properly will save you from stressing each month and wondering if you’ll be able to make ends meet. A good rule of thumb is to start by figuring out how much money you make after taxes.
What is Net Income?
Your paycheck’s net income is the amount you’ll receive after taxes have been withheld. Knowing this amount will provide you with a starting point to create your budget.
Save for Emergencies
You’ll need to create an emergency savings fund so that you’re ready if unexpected expenses come up. Consider how much you’d want to have saved in case of car trouble, healthcare emergencies, or other surprises. Keeping an emergency fund will give you a buffer and peace of mind.
Avoid Accumulating Debt
Understanding how to avoid getting into debt will serve you for the rest of your life, so getting ahead of it now will save you a lot of potential future pain. Learn to build your credit without burying yourself into a mountain of debt that will haunt you.
How to Use Credit Cards
While it can be tempting to use your credit cards, it’s best to reserve them for purchases you know you can pay off right away. For example, if you have a budget for gasoline and groceries each month, you can pay for those with your credit card and then pay it off each month using the funds from your budget.
Building Your Credit Score
Using your credit cards in this way will help build your credit and prevent you from being burdened with debt that could follow you for years. Credit scores are important, so make sure to take the time to learn how it works and avoid common traps.
Live Below Your Means
It may seem obvious after talking about budgeting, but living below your means is paramount to your financial success. If you make $100,000 per year but spend all of it, then your high salary is meaningless.
Save for the Future
When you make your budget for the first time, you should plan to be able to set as much money aside for savings as possible. Whether you invest in a retirement account or keep the money in a high-yield savings account is up to you, but either way, make sure you’re saving for the future.
Consider Consulting an Expert
As you work toward the goal of being out on your own and financially independent, talking with a financial expert could give you a great idea of the best way to start your adult life.
Asking the Right Questions
An expert in the field of finance can look at your income and expected expenses, review your financial goals, and help set you up on the right path.
Find Out What Your Bills Will Be
If your parents or guardians have been financing your life so far, there may be some expenses they expect you to take over when you move out. Are they currently paying your cell phone bill or car insurance? If so, you may need to be ready to start paying for those yourself.
Adjust Your Expectations
In the same vein, you’ll need to consider that some of the things you could afford before may not come as easily now. If the money you made previously could all be spent on fun things, you may need to make some cuts.
Budgeting Basics
That’s where your budget comes in — if you can swing it, set a specific amount for fun spending each month.
Looking Into Roommates
Financial independence doesn’t necessarily mean being on your own. You might be ready to spring from the nest of your parents’ home, but that doesn’t mean you can’t seek out a couple of roommates to help keep your expenses to a minimum.
How Cohabitating Can Help You Save
Roommates share a home, which means they also split rent and utility costs. It’s important to do your due diligence to make sure you can trust the people you’re living with to keep up their end of the bargain.
Know the Risks
Don’t forget to familiarize yourself with the risks of relying on other people for housing. If you sign a lease with someone else, you could be held responsible if they fail to pay their share.
Get Ready to Fly
Starting out on your own can be daunting, but with the right preparation, you’ll be just fine. Don’t forget to ask for help and lean on your resources when you need them.
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The post Gen Z’s Guide to Financial Freedom: Practical Advice for Independence first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
