What to Do First If You Feel Behind on "Adulting" With Money
Finding yourself worried about finances is like discovering you're in a complex escape room with cryptic puzzles at every turn. Everywhere you look, there's rent, bills, savings, and investments, each requiring different keys of understanding. If you feel a little behind on this whole "adulting" with money, don't worry—you're not alone. And more importantly, there's a path forward where you can catch up and thrive.
Understanding Why You Feel Behind
Before diving into actionable strategies, taking a moment to understand why you feel behind is essential. It might be due to societal pressure, comparing yourself with peers, or simply a lack of clear financial education in your younger years. Acknowledging these factors is powerful because it helps separate externally imposed stress from actionable goals.
Assess Your Current Financial Situation
Before making any changes, let's take a financial snapshot. This isn't just about measuring where you stand but about appreciating what your finances tell you. Here's how you can start:
List All Sources of Income: Include everything from your primary job, side hustles, and other income streams.
Catalog Expenses: Break it down into categories such as necessities (rent, groceries) and discretionary spending (entertainment, dining out).
Identify Debts and Liabilities: Include loans, credit card balances, and any family obligations.
Assess Assets: Include savings, investments, properties, and other tangible assets.
Set Clear, Achievable Goals
Next up, let's tap into the power of goal setting. Clear, well-defined goals act like a financial lighthouse guiding you through the fog. Start small but think strategically:
Short-Term Goals
These are typically achieved within a year and could involve creating a budget, building an emergency fund, or paying off particular debts. Small wins can build momentum and confidence.
Medium-Term Goals
These involve achievements such as saving for a once-in-a-lifetime trip, buying a car, or ridding yourself of credit card debt. Plan for these with timelines spanning a couple of years.
Long-Term Goals
Think retirement savings, purchasing property, or establishing a robust investment portfolio. These goals require patience but form the backbone of financial stability.
Embrace Budgeting as a Lifestyle
Budgeting often sounds like the financial version of a restrictive diet—but it's quite the opposite. Think of it more like a gym routine tailored to your life, allowing for flexibility while supporting long-term financial health.
Why Budgeting Matters
Budgeting provides a clear map of where your funds are coming from and where they're going. It's empowering rather than restrictive, allowing for informed choices rather than impulse decisions.
Crafting Your Budget
Choose a Method: Apps like Mint or You Need A Budget (YNAB) can simplify the process. Whether you prefer digital, spreadsheets, or even old-school pen and paper, find a system that resonates with you.
The 50/30/20 Rule: Begin with a basic structure—allocate 50% of your income to needs, 30% to wants, and 20% to savings or debt repayment.
Review and Adjust Monthly: Life changes, and so should your budget. Re-evaluate to ensure it reflects your current circumstances and future goals.
Building an Emergency Fund
Emergencies, by their nature, are unpredictable. Having a financial buffer can transform them from crises into manageable hitches.
How Much Should You Save?
A good rule is three to six months' worth of living expenses. However, start with what you can manage—progress is more important than perfection.
Where to Save It
Consider a separate high-yield savings account. You'll benefit from better interest rates while keeping the funds accessible but away from temptation.
Educate Yourself on Investing
Investment may sound daunting, and that’s understandable. Many myths portray it as a high-risk game reserved for the financially sophisticated. But the truth? It’s a path accessible to everyone, promising wealth creation over time.
Why Investing Is Vital
Investing is how your money earns its living. With the power of compounding, even modest investments grow significantly over time.
Starting with Investments
Understand Your Risk Tolerance: Reflect on your financial goals and timeline to determine how much risk you’re comfortable taking.
Explore Financial Instruments: Consider stocks, bonds, ETFs, or mutual funds. Each has different risk levels and growth potentials.
Leverage Robo-Advisors: If doing this solo feels overwhelming, robo-advisors can help provide a balanced portfolio tailored to your preferences with minimal fees.
Conquer Debt Strategically
Debt can feel like a relentless shadow—whether it’s student loans, credit cards, or personal debts. But with the right strategy, you can conquer it and step forward unfettered.
The Snowball vs. Avalanche Methods
Snowball Method: Pay off the smallest debts first. This method generates psychological wins and can build momentum.
Avalanche Method: Tackle the highest interest rate debt first. It's efficient and minimizes the amount of interest paid over time.
Build Your Financial Skillset
Financial education is a lifelong journey. The more you learn, the better equipped you'll be to make informed decisions.
Resources and Tools
Books and Online Courses: Titles like "Rich Dad Poor Dad" by Robert Kiyosaki or courses offered by Coursera or Khan Academy can provide valuable insights.
Podcasts and Blogs: Explore platforms like "The Financial Diet" or "Afford Anything." They can offer fresh perspective snippets during a commute or workout.
Cultivate a Wealth-Positive Mindset
A fundamental shift accompanies mastering finances—the mindset shift from lack to abundance. It isn't about ignoring financial challenges, but embracing growth and potential.
The Wealth-Positive Approach
Focus on Growth, Not Scarcity: Instead of fixating on cutting down expenses, ask how you can increase your income.
Practice Gratitude and Celebration: Regularly acknowledge your financial successes. This shift promotes satisfaction over limitation.
Wealth in Action
Here's a list of insightful takeaways to power up your financial journey:
Mindful Money Mapping: Create a visual map of your financial landscape—a vivid reminder of your goals and progress.
Automate Your Savings: Use automation to your advantage, ensuring savings happen seamlessly and effortlessly.
Curate Financial Filters: Adopt financial advice that aligns with your life instead of following trending, one-size-fits-all tips.
Revisit and Renew: Allow yourself quarterly financial check-ins to refresh strategies and infuse them with current aspirations.
Adjust for Joy: Make room for joy in your budget—choose to save for experiences that enhance your life rather than restrict it.
Taking the First Step Towards Financial Empowerment
Feeling behind with money doesn't define you—it's simply a place you're at today, and that's entirely okay. By breaking down complexity, crafting achievable goals, and taking consistent steps, you craft a future aligned with your financial aspirations. Remember, every decision you make is a stride toward empowerment. Begin where you are. Embrace the process, trust your decisions, and watch as those small changes lead to a more grounded and financially secure you. Welcome to your journey of clarity, growth, and robust financial strength.
