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Five money management tips for young adults

06 February 2023

4-minute read

Plan Well Save and invest Healthy Finances

Start building your financial future with the first steps of your career. (Credit: Shutterstock)

Congratulations on earning your first steady income! Now that you're making your own money, you can start building healthy money management habits. Learning how to enjoy the process can help you see how budgeting or saving improves the quality of your life and is more than an exercise in deprivation.

It can be challenging to control your spending when you feel the pressure to maintain a certain standard of living. You want to make a good impression on friends and family and not miss out on anything. But the YOLO (you only live once) mentality can lead to reckless money decisions.

Read on to learn how to manage money wisely and avoid financial stress.

1. Track your income

Budgeting is a tool to maximise your income and make saving a habit. Recording your expenses reveals your spending behaviour. It will help align your actions with your goals if you get side-tracked.

Use a budget planner template or an expense tracking app to understand how to balance what you earn and what you spend. Tracking your cash flow minimises stress and lets you know whether you can say yes to that invitation to after-office drinks.

2. Create budget categories

Money management skills lead to financial freedom and security. (Credit: Shutterstock)

The line between "needs" and "wants" can be blurry, especially when you have a steady income for the first time. So, apply these budget categories to track where your money goes.

Your future self

This savings category allocates funding to your future needs, whether for emergency purposes or retirement planning. You may want to consult a financial advisor to understand the needs of your future self.

Non-negotiables

Be honest with yourself about what you need to live. Start with the essentials: housing, transportation, food, health care and internet and mobile data.

Life goals

Do you want to pursue further education, travel or build a passive income stream? Estimate total costs and divide them into smaller quarterly goals to make large numbers feel more achievable.

Reward yourself

Money management can make you feel deprived instead of feeling like you are building wealth. However, allocating some dollars monthly to celebrations like savings milestones or career success leads to life satisfaction and self-motivation

3. Start spending and saving intentionally

Money management tips often emphasise the future benefits of savings. The challenge is overcoming present bias, or the tendency to care too much about things you can enjoy now relative to something you'll get in the future.

Budget categories will help with self-control. Think of them as missions for each of your dollars. How many dollars are you currently assigning to each mission? Is this aligned with what is important to you? If your expense tracking reveals overspending, start making changes by allocating a limit to your spending on each category.

Understanding why you're saving money also helps motivate you to stick to the savings habit. For example, here is how you can allocate 20 per cent of your income to specific savings goals:

5 per cent retirement
2 per cent further education
3 per cent next vacation
10 per cent next emergency fund

4. Use credit cards wisely

Credit cards are convenient and can help build credit scores. In addition, many have beneficial rewards and cash-back programmes. You can also use a credit card to monitor spending habits.

But owning a credit card requires financial discipline. Pay your credit card bill fully and on time to avoid late charges. Financial experts recommend spending 30 per cent or less of your credit card limit.

5. Think of money management as self-care

Managing your money is caring for your future self. (Credit: Shutterstock)

Maintaining a budget gives you the peace of mind to enjoy yourself without guilt. It can clarify priorities and make decision-making easier. Do a monthly review to ensure your budget reflects your monthly needs. There might be gifts to buy or a bonus – you'll want to customise your budget as your income and expenses evolve.

Just keep in mind that every self-care habit takes time to build. Stay driven by connecting with a community like AIA Vitality, which champions your financial wellbeing as much as your physical and mental health. This wellness programme has challenges and rewards to help you get more out of life.

Allocate some time on your calendar to celebrate each money management milestone. Create a 15-minute playlist and prepare a treat as you work on your budget planner. Set a schedule on your calendar for something like "Finance Friday" or "Money Monday". Take care of your financial wellbeing one step at a time.

A "scarcity mindset" may be preventing you from achieving goals. In this episode of AIA Voices, finance experts Anna Haotanto and Lachlan Campbell, with AIA Ambassador Nico Bolzico, explain how this way of thinking prevents financial wellness. Watch as they share tips to put you on the path to financial freedom.

AIA Voices is a community of influential and educational voices from around Asia to talk about life, health and wellness. A platform to educate, motivate and inspire people to make positive behavioural changes on their health and wellness journey. Providing an opportunity for communities across Asia to connect, collaborate, and learn from each other. Designed to drive AIA One Billion, our ambition to engage a billion people to live Healthier, Longer, Better Lives by 2030.

References:

University of Rhode Island Human Development and Family Science Faculty Publications. 2019. Present Bias and Financial Behavior. [online] [Accessed on 20 September 2022]

Scribner. Angela Duckworth. 2016. Grit: The Power of Passion and Perseverance [offline]

Disclaimer:

This is general information only and is not intended as financial, medical, health, nutritional or other advice. You should obtain professional advice from a financial adviser, or medical or health practitioner in relation to your own personal circumstances.