As a young professional, you’re probably just graduated from college and started a new career. Most likely, you don’t have any mortgage to stress over or children who rely on you. This means you have a unique balance of time, energy, and money.
Although you might have a good job, unfortunately, personal finance often isn’t taught in schools. As such, many young professionals don’t know how to manage their money. It’s for this reason that we have curated these four financial management tips for young professionals.
1. Protecting Your Wealth
Laying the right foundations for your wealth is one of the best ways to ensure that you don’t lose all your hard-earned due to one or two unfortunate events. Some of the steps you can take include getting insurance, learning to calculate and pay your tax correctly, and getting a financial advisor or planner.
Insurance offers you financial security in the event of a loss or sickness. There are different types of insurance policies, ranging from income protection insurance to renters insurance, health insurance and disability insurance, just to name a few. Many people don’t see the purpose of insurance, and unfortunately, they may never know until something tragic happens.
For instance, imagine if in the future you’re the breadwinner of your family and you suddenly fall sick and end up with a disability. Disability income insurance ensures that you continue to receive your income and maintain the lifestyle you’ve already created for yourself. This means you can have peace of mind knowing that you and your spouse or family will receive social security disability benefits. At the end of the day, protecting your wealth is just as important as creating that wealth. So ensure you take this area of financial management seriously.
2. Investing Wisely
When you’re young, it’s easy to get carried away and believe that you have all the time in the world to get your financial life together. While it’s true that you still have the time, waiting until you are older can make a huge difference, especially when you think about the power of compound interest.
This doesn’t mean you should rush into the next investment opportunity that comes your way. Instead, ensure that first, you have a good saving habit and secondly, before investing, make sure it’s something you understand. For instance, before investing in any crypto asset, ensure that you know how it works and the different ways you can secure these fascinating digital assets.
You see, as a beginner in the crypto world, you’ll need to choose what cryptocurrency exchange platform to use in storing some of your popular cryptocurrencies. These include Bitcoin (BTC), Ethereum, Litecoin, and Dogecoin. You can start by researching Kraken vs Coinbase wallet to know which digital wallet fits your personal preference. Things to look out for include the transaction fee structure and ease of use.
3. Ignoring the Joneses
You’ve probably already heard this tip from your parents, and it’s a good one. Quit trying to keep up with the Joneses (or Kardashians, if you’re a reality TV fan). However, this is easier said than done, thanks to Instagram, Pinterest, and every other social media platform filled with aesthetically pleasing pictures of people and their ‘unblemished’ lives. You’ll need to devise ways to conquer the fear of missing out that drives many young professionals into establishing spending habits they can’t afford. Your inability to practice self-control will lead to you making reckless financial decisions and racking up debts.
4. Having an Emergency Fund
One of the first things to do the minute you start earning is to set up an emergency fund by always paying yourself first whenever you receive your paycheck. Your emergency fund should typically have three to six months of your living expense, and it should be money that easy to access in the event of an actual emergency. The mistake many young professionals make is using a credit card as an emergency. This is wrong, and it can lead to unimaginable debt. You will need to learn about fcra requirements dispute.