Money Management Tips for Young Adults

As a former small business owner, I've learned the value of wise money management the hard way. If you spend money on a whim or on the wrong investment, you lose out when a good opportunity comes along.

Having money in your pocket is a lot like standing in a great hall with hundreds of doors appearing and disappearing around you. Once you buy a ticket for one door, all the other doors close. Money management is a question of choosing the right door, and for young adults money management is also a question of starting life the right way. Based on my business experience, here are the most important tenants of sound money management for young adults.

Watch Out for Emergency Money

As a young adult you start going out without adult supervision. Consequently, family or friends may give you emergency money or a credit card to keep in your wallet. That's a good idea, as long as "emergency" is clearly defined in your mind.

Seeing the perfect shoes on sale for one day is not an emergency. It may be a missed opportunity not to buy them, but emergency money isn't yours to spend. Think of emergency money as a means of getting out of trouble, not getting into debt.

Don't Spend Expected Earnings

Most adults I know make plans for spending their income well before they get it. So why is that a bad idea? Because spending what you will earn before you earn it reverses cause and effect. Instead of going to work to earn money you will enjoy spending tomorrow, you end up going to work to pay off debts you amassed yesterday. How enthusiastic would you feel about your work and life then?

Whether you're expecting money for your birthday or a paycheck for your after-school work, your wise money management rule should be to ignore temptation and spend your money after you get it. You may lose out on a sale or two, but in the long run your life will be free of debt and, consequently, better and happier.

Avoid Credit Cards Like the Plague

It almost feels like an initiation right in our society-you turn eighteen and get your first credit card. So what's wrong with credit cards? Why is it a bad idea to buy something today and pay for it slowly. There are several reasons why credit cards will derail your money management and your life along with it.

Credit card companies will tempt you to spend with the promise of cash-back bonuses. However these typically range between 1% to 5% of the money you spent, while the interest on your debt will be much higher.

Credit card companies will offer you promotional credit card rates upon opening a new card. However, these only last between six to twelve months, after which your interest rate will double, triple or worse.

Credit card companies require you to make a minimum monthly payment, which will typically pay off your credit card debt within twenty four years. That's right, twenty four years. If you miss a payment, or even if you're late, you will be charged an expensive late fee and your interest rate will increase drastically.

Finally, credit cards make it too easy to spend money. When you pay in cash you see your wallet growing thin and you can't buy more than you have. But when you pay with a credit card, spending is as easy as swiping a plastic card.

If you're a young adult seeking to learn good money management skills you're already halfway there, because you're aware of the need to treat money with respect. Next time you decide to spend money don't think of the price tag in terms of Dollars. Instead ask yourself how many hours you would have to work to earn that sum. In other words, how much of your time on earth would that purchase cost you. Then you will realize that money is the most important thing in the world, and money management is life management-your life and what you make of it.

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