The First 7 Money Decisions Young Adults Should Make
A first paycheck can feel like freedom, but it is also a young adult’s first opportunity to shape their financial future. Without much experience, however, many young adults don’t know what to do with their money.
Financial experts offer the first seven money decisions young adults should make.
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1. Build a Budget Before Anything Else
A budget can feel like it’s restricting your spending, but according to AJ Schneider, founder of Beyond The Green Coaching, it’s “the foundation of building wealth.” Without one, you can’t make smart financial decisions.
Your budget should make room for debt repayment, savings and short-term expenses like dental work or leisure activities, Schneider said.
Moreover, if you make budgeting “a self-care practice and do it consistently,” you’ll be in strong financial shape, she said.
2. Start Saving From Your First Paycheck
Waiting to save until you make more money is one of the most expensive mistakes you can make, according to Todd R. Christensen, a financial education manager at Money Fit.
“Save something, anything, from every paycheck starting day one or starting today.”
He warned against delaying investing by running the math — $1.50 invested today will be worth about $5.75 in 40 years, growing nearly 500% by retirement age. In contrast, those who wait to start investing till their 40s will only see those investments grow by about 135%.
Saving also “creates a positive feedback loop that investing is fun,” Schneider said.
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3. Learn To Live Below Your Means
One of the biggest early traps is trying to maintain the lifestyle that was funded by your parents. Christensen said, “[Young adults] forget that their parents needed 20 to 40 years to generate that lifestyle and didn't start that way at 20 or 25 years of age.”
She added that comparisons aren’t helpful. “Just because someone else can [live more expensively], doesn't mean you can.”
4. Delay Credit Cards
Credit can be useful, but starting too early without savings or discipline can start a debt cycle that’s hard to break. Christensen urged delaying opening a credit card until after you’ve spent at least a year with a steady job and have practiced budgeting and saving.
He warned, “Young adults who get a credit card before building any sort of savings account all but ensure they'll be in debt for a decade or more.”
Once you do get one, Schneider urged, “Pay off your credit card in full every month. If you can't afford to buy it, you can't afford to have it.”
5. Keep Your Housing Costs Low
Keeping housing costs low gives young adults flexibility to save and invest, Christensen said. This means not being too proud to share an apartment even after graduating or moving away from home.
Don’t forget that sharing a living space means sharing the financial burdens that come with it, too.
6. Balance Saving, Investing and Debt
Young adults do not need to choose one financial goal at the expense of all others.
“Do all three, but just don't do all three equally,” Christensen said. “If you're struggling with high-interest debts, send 70% or 80% of your extra cash to the debt and split the remainder between saving and investing.”
Prioritize debt repayment, Schneider said, and create a plan. Once you have one in place, it's easier to save and invest.
7. Develop the Right Money Mindset Early
Young adults who realize that “nobody is coming to rescue you” will have the best success, Schneider said. “You have to build financial confidence through having a relationship with money.”
That mindset, combined with consistent habits, turns early decisions into long-term financial stability.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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