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If you’re still on your parents’ cell phone plan or car insurance you’re not an adult. That was the summary of what I had a discussion with my friend over brunch today. Relatively, that’s true.
Don’t get me wrong; there is nothing wrong with being a part of your parent plan. I’m still a part of my parent car insurance because it’s cheaper and less of a headache.
Today, I’m going to teach you how to become a little bit more independent when it comes to finances enabling you to enter the world of an adult. Remember, hitting a specific age does not necessarily make you an adult. I met a load of adults who still behave like wreckless monkies in a glass shop and vice-a-versa. I met individuals who are younger then I and they know what is up!
Now, let’s enter the wondrous world of financing!
1. Credit Score
First things first, you need to check your credit score and understand where you stand. Of course, it’s not essential if you’re not planning to purchase a car or house. Credit scores are mainly for the big purchases, not the small one.
I mean can you imagine walking into Walmart and purchase something random then the cashier said: “Oh, sorry sweetheart. I got some bad news; you cannot purchase this milk because your credit score is bad.”
Credit score may not matter at the moment, but one day you will purchase something big, and that’s when it makes a difference. Credit score not only decides whether or not you will buy something, but whether you can take out a loan. At one point or another, you will need a loan.
You can get a free credit score check with your bank!
2. Emergency Funds
Many of us live from paycheck to paycheck which stinks. I suggest cutting out the small things such as eating out or getting a much needed morning coffee. Put the extra dough into your savings and watch it grow over time because you never know when you will need it.
I use three methods of savings:
The first is a regular glass jar. Each time I would go shopping, I would withdraw $10-20 and shove it in there when I get home.
Second, is Acorn. Each time I shop, Acorn will automatically round-up my money into my Acorn account. Every week, when I get paid, I would throw in an extra $10 or more. Read more about, Acorn with my post – Is Acorn Worth it?
Third, I opened another checking account with another bank. For me, opening a saving with the same bank does not help me save. I am continually withdrawing money from my saving and depositing it in my checking. With another bank card, I can always leave it at home beside my jar of cash – out of sight, out of mind.
It is so important to leave how to budget your paycheck. It would be best if you never spent more then what you have. Sit down and learn how much you can spend on your groceries or a beautiful night out of town.
Read all about my failing budgets so you don’t have to go through it!
This is a retirement fund – which can differ from company to company. When you become an adult, you need to open a 401K for retirement. I suggest, asking your supervisor for a – one in one – discussion in regards to your retirement despite your age.
5. Paying Off Debts
Every single debt has a different interest rate.
I understand that it’s heartbreaking to look at the numbers and I hate looking at it myself, but you need to establish the fact that you’re in debt. Please do not turn the other cheek, because it will bite you later.
Learn which debt has the highest interest rate and pay the smallest amount first.
Reader: “Hold up…what?”
Yes, you read right. Pay off the smallest loan and shred the credit card. You want to focus on the simplest task first instead of tackling the largest one or worse, all of them at once. I made the mistake of paying off each credit card at the minimal amount and focus on the largest debt. I realized that I get less grey hair for paying off the smallest debt. It gave me a dash of happiness when I realized I no longer have to pay for that account.
Related: How to Minimize College Debts
6. Side Hustles
Side hustling is an excellent idea to pay off debts and to save money. There are so many different types of side hustling from blogging to selling items on eBay.
I understand that not everyone knows how to play the stock marketing game – I know I don’t. I recommend, small-time players like us, to use Acorn to save money. It won’t have a considerable effect if the stock market ever crashes which can be a huge relief.
There you go! My seven steps towards financial independence. Remember, you can still be on your parents’ plan, after all, it saves money for a rainy day! Just try to be a little more like an adult!