As a young adult paying bills for the first time, you may feel overwhelmed. Figuring out how to be financially responsible can be confusing and stressful. Social media makes budgeting more difficult. It’s easy to compare yourself to others and feel behind instead of focusing on your goals.
Fortunately, managing bills is a skill you can learn. Money is a matter of math, but it also has a psychological component. You can reduce financial stress by budgeting responsibly and knocking out your financial goals one step at a time. Here are five tips for young adults to manage bills better.
1. Keep a List
It’s easy to lose track of where your money is going. The first step in managing bills is to start tracking your spending habits. Some people prefer to keep a written record, while others simply check their online accounts. If you use multiple payment methods (cards, cash, and checks), it can be tricky to get an accurate snapshot of your monthly spending habits.
Check all your accounts to review your spending for the last month. Take notes on how much your bills cost and any expenses that surprised you. Once you know what’s going on, you can take charge of your spending. Update any subscription accounts and make a plan for next month’s purchases. It’s wise to revisit this process every few months.
2. Pay Off Debt
According to 2019 data, the average American owes around $90,460 in student debt, mortgages, and other loans. Unfortunately, debt has a nasty way of growing if you don’t pay it back quickly. The longer you take to pay back debt, the more interest you’ll have to pay in addition to what you originally borrowed. Although you can’t always avoid debt, you can manage it to minimize the overall cost.
There are many different ways to handle debt. However, motivating yourself to pay it back as quickly as possible is the most important thing. Because it can be psychologically motivating, some people repay their smallest accounts before large ones. Paying off debt ensures you have enough money for current bills and can plan freely for the future.
3. Start With Priorities
Many financial advisors suggest following the 50/30/20 rule every month. According to this rule, about 50% of your paycheck should go to bills and living expenses. After you’ve paid your bills, you can put 20% of your compensation into savings. Whatever is left can be considered fun money or put toward a specific financial goal.
Try using a budgeting app to help you manage your finances every month. Nearly 70% of Americans pay their bills at least three different ways each month. An application can help track your spending across different platforms and ensure you’re paying for priorities first. Using an app could reduce financial anxiety and quickly refine your monthly budgeting goals.
4. Define Your Goals
Although some people spend too much, others have the opposite problem. Because of financial anxiety, they hoard their money in a savings account, where it loses value over time. Young adults need to remember that money is a means to an end. It’s not an end in itself. It is easier to use your money well if you have defined financial goals.
For example, think about the reasons you make money. What do you want to use it for? What kind of lifestyle do you want to live and why is that lifestyle attractive to you? Money represents your time — a priceless resource you can’t get back. Consider whether the goals you’re working toward are worth the time and money you invest in them.
5. Set a Time
No one enjoys thinking about their bills. However, it’s easy to get distracted by your busy schedule and forget to pay your monthly expenses on time. You can automate some statements to make this process easier. However, it’s also a good idea to allot a specific time for paying bills in your monthly calendar.
Planning ahead will help you avoid missing payments or having to pay multiple bills at once. This could reduce financial anxiety and keep you firmly in charge of your finances. If paying your accounts stresses you out, try planning a fun event after you complete this task. You can rewire your brain and put financial worry behind you with the right strategies.
You’re the Captain of Managing Your Bills
Sometimes, finances can feel as mysterious and overwhelming as the ocean. If finances are an endless depth of water, your budget is the ship and you’re the captain. The decisions you make will determine your financial destination. Follow these five tips to help manage your bills successfully.