Young adults today have a wide range of financial struggles. For the most part, they have too much debt, bad spending habits, not enough savings and poor investing skills. Throw in today’s record unemployment for young workers and the result isn’t pretty. Most people would agree that investing should be a part of your overall financial picture. Furthermore, most people understand that starting early in your financial activities is crucial as it allows your money to compound over time and also helps you establish habits that will stay with you as you get older.

That said , let’s look at a few ideas to help you improve your finances.

Contributing to a 401(k) Plan

One of the easiest ways for young adults to establish regular investing habits is through a 401(k). Although this is limited to those who work for a company that offers such a plan, participating in a 401(k) plan is a great option for individuals who have access to one. I definitely recommend taking advantage of your 401(k) plan; especially to maximize company matching.

By automatically taking money out of your paycheck and contributing it towards your retirement investments, you’ll learn to live on less than you earn and also build a retirement saving at the same time.

What about those who don’t have access to a 401(k)? You will have to be more disciplined in your spending and saving and make sure you are stashing money away towards your long term goals, probably using an IRA or a Roth IRA.

Actively Saving Each Month

Whether you participate in a 401(k) or not, I strongly encourage you to make sure you are actively saving each month. Whether you put money into a savings account or a Roth IRA account, the most important part is that you are spending less than you make. There is no greater habit to master financially. If you need too, set up automatic withdrawals into your savings account each month.

It’s very easy to put off a month because of “special expenses”. What I’ve learned over the last few years is that there will always be special expenses, they just tend to look different each month. Maybe your dog had to go to the vet and your bill was $300, or your car broke down, or you needed to replace some sod; these are all unforeseen expenses yet they tend to be pretty regular. Instead of putting off saving each month because of these expenses, you must adjust your overall budget and plan for unforeseen expenses. If one doesn’t hit, then you’ll have even more money available to save.

As you build up a sufficient emergency fund, you should consider investing this money. While starting slow and sticking to the basics is recommended for your first “active” investing experiences — active compared to your 401(k) plan. This will help you learn much more about the stock market and how things work. This continuous education is a great asset.

Saving to Buy Things With Cash

Maybe you need to buy a car, or a new air conditioner for the house, or some landscaping, or a new computer. Either way, these are significant purchases and can be viewed as investments. The best way to invest in these assets (even though they are depreciating assets) is to pay for them in cash. Buy only what you can afford and if you can’t, wait until you have the money rather than borrowing.

Buying a car with cash rather than borrowing the money is almost heresy in today’s society, but I truly believe this would be a huge positive for people. Yes, this drastically changes what you can buy, but maybe you should be driving a clunker instead of that Lexus in your drive way.

What a fantastic habit to work on while you’re young.

Your Habits Will Pay Off Over Time

The habits you establish early in your life will stay with you. By getting a hold of your financial habits whether it’s a 401(k) plan, active investing or buying things with cash, you will set yourself up for greater freedom in your financial life. Sticking to these habits as you progress in your career and begin to make more money will result in a very nice result.

Take time to examine your life and habits. Where do you need work? Is investing a part of your financial picture? How long do you plan to wait until it is? Start today!

Photo by alamosbasement.