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7 Money-Smart Tips for Young Professionals

June 29, 2022

Today’s young professionals face a variety of challenges when it comes to money management, from consumer prices rising by 8.5% this year to continued stock market volatility. This can make it difficult to create successful financial plans, pay off debt, and save for the future. To help you take control of your finances as you kick off your career, here are a few tips that will set you on the path toward stability.

1. IMPROVE YOUR FINANCIAL LITERACY

Financial literacy describes the knowledge and skills necessary to make informed decisions on money matters, from budgeting and debt management to investing in various assets. It’s critical for young adults to learn these skills early, as effective financial management becomes increasingly important as you further your career.

2. NEGOTIATE YOUR SALARY

The most effective way to increase your monthly budget is by negotiating your salary. It’s always better to demand a higher salary when beginning a new job, even if you’re satisfied with the initial offer. For those who are already employed, it never hurts to negotiate a salary increase with your current employer, especially as you pursue higher-paying opportunities.

3. IMPLEMENT A 50/30/20 BUDGET

The 50/30/20 ratio is a simple budgeting method designed to help you keep your spending habits in line with your financial goals. It divides your monthly after-tax income into three cost categories:

50% Necessary Expenses: Necessary expenses go toward everything that’s essential to live in the modern These payments include things like housing and utility bills, groceries, and transportation costs.
30% Discretionary Purchases: This non-essential spending on entertainment, recreation, and indulgences can help improve your lifestyle, but it can also be cut out of your budget in times of need.
20% Savings and Debts: For those who have the available income, you should always dedicate at least 20% of your checks toward your You can also use this 20% to pay off debts, create a rainy-day fund, or plan for retirement.

4. TAKE ADVANTAGE OF EMPLOYEE BENEFITS

From health, dental, and vision insurance to flexible spending accounts (FSAs), many companies offer a variety of employee benefits that help you save a ton of money in the long run. Insurance will help reduce your expenses for regular checkups and emergency visits, but if your employer offers an FSA, you can also set aside pre-tax earnings to cover any out-of-pocket expenses. It can also lower your income taxes as these contributions are deducted before taxes are calculated.

5. START SAVING FOR RETIREMENT

If your employer offers a 401(k) plan, you should sign up as soon as possible. Not only will this ensure that you’re saving for the future, but if your employer provides a 401(k) match, they’ll contribute additional funds to your account, up to a certain percentage of your individual contribution. That’s essentially free money, so be sure to take full advantage. If you’re eligible, you should also consider contributing to an individual retirement account (IRA) for the potential tax advantages.

6. PROTECT YOUR WEALTH

As the Bureau of Labor Statistics shows a continued rise in inflation, protecting your wealth becomes more important than ever. One good way to ensure you maintain a healthy savings is to look for low-risk, high-interest savings accounts. You should also look for insurance plans that cover more than just health. This can include things like renters or homeowners insurance for your property, disability insurance in case you’re unable to work, and life insurance for your family should something happen to you.

7. CONSIDER PARTNERING WITH A FINANCIAL PROFESSIONAL

Financial advice isn’t just for the exorbitantly wealthy or the financially challenged. Whether you’re a young professional trying to reach certain savings goals or you just need help developing a budget plan, our team at Olistico Wealth will help you take control of your spending habits and realize a brighter future. To find out more about building your wealth and securing your future, reach out to our team today.

References:

(2022, April 18).Consumer prices up 8.5 percent for year ended March 2022.U.S. Bureau of Labor and Statistics.

https://www.bls.gov/opub/ted/2022/consumer-prices-up-8-5-percent-for-year-ended-march-2022.htm#:~:text=The%20Consumer%20Price%20Index%20increased,month%20advance%20since%20December%201981

Jackson, A. L. (2022, June 2). June Stock Market Outlook. Forbes, https://www.forbes.com/advisor/investing/stock-market-outlook-and-forecast/

Parker, T. (2022, April 25) What is a Good 401(k) Match? Investopedia, https://www.investopedia.com/articles/personal-finance/120315/what-good-401k-mat ch.asp#:~:text=The%20Bottom%20Line,-Don%27t%20pass&text=Many%20employe rs%20match%20as%20much,to%20get%20the%20maximum%20match´╗┐

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