Let’s be real — adulting comes at you fast. One minute you’re in school, the next you’re staring at your bank app wondering where all your money went. Managing your personal finances might feel overwhelming at first, but the good news is: you don’t need to be a financial expert to make smart money moves.
Whether you’re just starting your first job or figuring out how to file taxes on your own, here are 10 essential things every young adult should be doing with their money — starting today.
1. Build a Simple Budget (and Actually Use It)
Budgeting isn’t about cutting out everything fun — it’s about knowing where your money is going and making sure you have enough money for essentials, savings, and some enjoyment. A good place to start is the 50/30/20 rule:
- 50% for essentials (rent, groceries, transportation)
- 30% for wants (entertainment, travel, subscriptions)
- 20% for savings and debt
Creating a financial plan is crucial to navigate life’s unexpected twists and turns. This plan should include strategies for building emergency funds and setting budgets to achieve financial goals. By focusing on these areas, you can ensure that you’re prepared for emergencies and have a roadmap for achieving your long-term financial objectives.
Use a notebook, spreadsheet, or free app like YNAB to keep track. Consistency is key. Regularly reviewing and adjusting your budget can help you stay on track and adapt to changes in your financial situation. Budgeting apps can be particularly helpful, as they offer automated tracking and reminders to help you manage your personal finances efficiently. With these tools, you can easily log your expenses, monitor your spending habits, and make informed decisions about your financial future.
Additionally, consider setting up alerts for bill payments and account balances to avoid late fees and overdraft charges. By staying on top of your financial commitments, you can maintain control over your finances and work towards your financial goals with confidence. Remember, building a budget is not a one-time task; it’s an ongoing process that requires regular attention and adjustments to reflect your changing financial landscape.
2. Start an Emergency Fund
Life happens. Your car breaks down, you lose your job, or your laptop gives up during finals. Creating an emergency fund is crucial to handle these unexpected expenses and keep them from turning into debt. Start small — $500 is a solid first goal. Over time, aim to save 3–6 months of living expenses.
Set it up in a separate savings account so you’re not tempted to dip into it for concert tickets. Budgeting apps can help manage your personal finances and track your savings for the emergency fund, making it easier to achieve your financial goals.
3. Open a Checking and Savings Account (If You Haven’t Already)
You’ll need both. Checking for your everyday spending. Savings for goals and emergencies. Look for accounts with:
- No monthly maintenance fees
- No minimum balance
- Good mobile apps that allow you to manage your finances conveniently through your phone
Online banks and credit unions often have better rates and fewer fees than traditional banks.
4. Understand Credit Scores and Why They Matter
Your credit score is a crucial component of your financial life, influencing everything from your ability to secure a loan to renting an apartment or even getting a job. A good credit score can open doors to better interest rates and terms, saving you money in the long run. Conversely, a poor credit score can make borrowing more expensive or even impossible.
Credit scores are calculated based on five key factors:
- Payment History (35%): This is the most significant factor, reflecting whether you’ve paid past credit accounts on time. Late payments can severely impact your score.
- Amounts Owed (30%): This refers to your credit utilization ratio, which is the amount of credit you’re using compared to your total credit limit. Keeping this ratio low is essential for a healthy credit score.
- Length of Credit History (15%): A longer credit history can boost your score, as it provides more data on your financial behavior.
- New Credit (10%): Opening several new credit accounts in a short period can be seen as risky behavior and may negatively affect your score.
- Credit Mix (10%): Having a variety of credit types, such as credit cards, mortgages, and installment loans, can positively impact your score.
To improve your credit score, start by understanding your current financial situation. Regularly review your credit report to ensure accuracy and identify areas for improvement. Pay your bills on time, keep credit card balances low, and avoid applying for too much credit at once. High-interest rates on unpaid credit card balances can significantly impact your financial stability, so consider strategies like balance transfers and focused repayment methods to manage these costs.
Many credit card companies provide your credit score for free on your monthly statement or through online account access. Use these tools to monitor your progress and stay informed about your credit health. By taking proactive steps to manage your credit, you can enhance your financial security and achieve your long-term financial goals.
5. Avoid High-Interest Debt (Especially Credit Cards)
Credit cards are convenient — but also dangerous if you don’t pay them off in full. Interest adds up fast, with unpaid balances accruing an average interest rate of around 17%. If you’re already carrying a balance, focus on paying it down aggressively. In the meantime, use debit or cash to avoid adding more to your balance.
When it comes to borrowing, it’s crucial to borrow wisely and only what is necessary. Avoid taking on excessive debt based on lenders’ maximum loan allowances. By minimizing borrowing, you can save money for other financial goals and achieve long-term financial stability.
6. Set Financial Goals (Short- and Long-Term)
Setting financial goals is a fundamental step in managing your personal finances and achieving financial success. It’s about defining what you want to accomplish with your money and creating a plan to get there. Whether your dreams involve traveling the world, buying a car, moving out on your own, or starting a business, having clear financial goals will guide your decisions and keep you motivated.
Begin by setting SMART goals—Specific, Measurable, Achievable, Relevant, and Time-bound. These criteria ensure that your goals are well-defined and attainable. For instance, instead of saying “I want to save money,” a SMART goal would be “I want to save $5,000 for a car within the next 12 months.”
Once you’ve established your goals, write them down and break larger objectives into smaller, manageable monthly savings targets. This approach helps you stay on track and measure your progress. For example, if your goal is to save $5,000 in a year, aim to save approximately $417 each month.
Tracking your progress is crucial. Utilize budgeting apps, spreadsheets, or financial planning tools to monitor your savings and adjust your strategies as needed. Regularly reviewing your goals and celebrating milestones can keep you motivated and focused on your financial journey.
It’s also important to differentiate between short-term and long-term goals. Short-term goals might include saving for a vacation or paying off a credit card, while long-term goals could involve retirement planning or buying a home. Balancing both types of goals ensures you’re working towards immediate needs and future aspirations.
Remember, financial goals are not set in stone. Life circumstances change, and your goals may need to adapt accordingly. Regularly reassess your financial situation and adjust your goals to reflect new priorities or challenges. This flexibility allows you to stay aligned with your evolving financial life and ensures you’re always working towards meaningful objectives.
By setting and pursuing financial goals, you create a roadmap for your financial future. This proactive approach empowers you to make informed decisions, manage your finances effectively, and ultimately achieve the lifestyle you desire.
7. Start Saving for Retirement (Yes, Now!)
Retirement might seem like a distant dream, but the earlier you start saving, the more comfortable your future will be. Retirement planning is essential, and even small contributions today can grow into substantial savings thanks to the magic of compound interest. The key is to start as soon as possible, even if you can only afford to save a little each month.
Begin with exploring your employer’s retirement savings options, such as a 401(k) plan. If your employer offers a company match, take full advantage of it. This is essentially free money that can significantly boost your retirement savings. Employers play a significant role in providing financial wellness benefits for employees, which can reduce financial stress and increase job satisfaction.
If a 401(k) isn’t available or you want to diversify your retirement savings, consider opening a Roth IRA. Contributions to a Roth IRA are made with after-tax dollars, but your investments grow tax-free, and qualified withdrawals in retirement are also tax-free. This can be particularly beneficial if you expect to be in a higher tax bracket in retirement.
As you save, be mindful of the tax implications of your retirement contributions. Contributions to a traditional 401(k) reduce your taxable income, potentially lowering your tax bill today. On the other hand, Roth IRA contributions do not offer an immediate tax break but provide tax-free income in retirement. Tax preparation software like ezTaxReturn can help you navigate these complexities, ensuring you claim all the deductions and credits you’re eligible for.
Regularly review your retirement savings strategy to ensure it aligns with your long-term goals. Consider factors such as your expected retirement age, lifestyle aspirations, and any potential sources of retirement income, like Social Security. By staying proactive and informed, you can build a secure financial future and enjoy a comfortable retirement.
8. Investing for Growth
Investing is an essential part of any long-term financial plan, as it can help you grow your wealth over time. There are many different types of investments to choose from, including stocks, bonds, and mutual funds. Each type of investment comes with its own set of risks and rewards, so it’s important to understand your options.
When investing, it’s crucial to consider your risk tolerance and time horizon. Are you comfortable with the ups and downs of the stock market, or do you prefer the stability of bonds? How long do you plan to keep your money invested? Your financial goals and objectives will also play a significant role in shaping your investment strategy.
A well-diversified investment portfolio can help you manage risk and increase your potential for long-term returns. Diversification means spreading your investments across different asset classes to reduce the impact of any single investment’s poor performance. Remember, investing always involves some level of risk, and there are no guarantees of returns. However, with the right investment strategy and a long-term focus, you can increase your chances of achieving your financial goals.
9. Insurance and Protection
Insurance is an essential part of any comprehensive financial plan, as it can help protect you and your loved ones from unexpected events and expenses. There are many different types of insurance to choose from, including life insurance, health insurance, and disability insurance. Each type of insurance serves a specific purpose and provides a safety net in times of need.
When selecting an insurance policy, it’s essential to consider your individual needs and circumstances, as well as your financial goals and objectives. For example, life insurance can provide financial support to your family in the event of your death, while health insurance can help cover medical expenses. Disability insurance can replace a portion of your income if you’re unable to work due to illness or injury.
A well-structured insurance plan can help you manage risk and ensure that you have enough money to cover unexpected expenses. It’s also important to keep in mind that insurance premiums can vary depending on your age, health, and other factors. However, with the right insurance coverage, you can have peace of mind knowing that you and your loved ones are protected.
10. Learn How Taxes Work
Understanding taxes is an essential part of managing your personal finances and ensuring you’re not overpaying or facing unexpected penalties. Taxes can seem confusing, but they’re totally manageable — especially if you’re using tax preparation software like ezTaxReturn. To effectively manage your taxes, it’s crucial to first assess your current financial situation and understand the basics of the tax system.
Key Tax Concepts to Understand:
- Types of Income: Know the difference between W-2 and 1099 income. W-2 forms are used for employees, showing your annual wages and the amount of taxes withheld from your paycheck. 1099 forms are for independent contractors or freelancers, detailing income that hasn’t had taxes withheld. Understanding these forms will help you accurately report your income.
- Deductible Expenses: Keep track of deductible expenses like student loan interest, education credits, and work-related costs if you’re self-employed. These deductions can lower your taxable income, potentially saving you money. Familiarize yourself with common deductions and credits applicable to your situation to maximize your tax savings.
- Filing Requirements and Deadlines: Ensure you file on time to avoid penalties. The IRS typically requires tax returns to be filed by April 15th, but extensions are available if needed. Knowing the deadlines and requirements will help you stay compliant and avoid unnecessary fines.
- Tax Brackets and Rates: Understand how tax brackets work. The U.S. tax system is progressive, meaning the more you earn, the higher percentage you pay on additional income. Knowing your tax bracket can help you plan and make informed financial decisions.
Tax Software and Assistance: First time filing? Tax preparation software like ezTaxReturn makes the process fast and easy — no tax knowledge required. We offer step-by-step guidance and ensure accuracy, which is especially helpful for beginners.
Tips for Effective Tax Management:
- Organize Your Financial Documents: Keep all your financial documents, such as pay stubs, expense receipts, and previous tax returns, organized and easily accessible. This will simplify the filing process.
- Review Your Withholding: Check your tax withholding to ensure you’re not overpaying or underpaying taxes throughout the year. Adjust your W-4 form if necessary to match your current financial situation.
- Stay Informed About Tax Laws: Tax laws can change annually, affecting deductions, credits, and tax rates. Stay informed about these changes to optimize your tax strategy.
By understanding how taxes work and utilizing available resources, you can manage your tax obligations more effectively and make informed decisions that benefit your financial life.
11. Stop Comparing Yourself to Others
Social media makes it look like everyone’s living their best (and most expensive) life. But most people aren’t showing their student loans or credit card debt. Don’t fall into the trap of overspending just to keep up.
Your only competition is you — focus on your goals, your savings, and your future.
12. Keep Learning About Money
Financial literacy is a journey. The more you know, the better your decisions will be. Try:
- Podcasts like “So Money” or “The Ramsey Show”
- YouTube channels like “Graham Stephan” or “The Financial Diet”
- Following ezTaxReturn for easy-to-understand money and tax tips
You don’t need to have it all figured out today — but taking small steps now, like using budgeting apps to manage your finances, will put you in a much stronger financial position tomorrow.
Need help filing your taxes? Whether you’re a first-time filer or just tired of doing it the hard way, ezTaxReturn makes tax season simple. File online fast, with step-by-step guidance and built-in accuracy checks. Get started now at ezTaxReturn.com
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
