Successfully Launch Into Adulthood

after college

A few of my co-workers have mentioned that they are postponing their retirements so they can “help out” their adult children or soon to be adult children. I think it’s great when a parent can lend a helping hand to their children as they transition to being an adult, although teaching them financial skills is often better than just giving them a handout. I also have no problems with a child living at home with their parents as they settle into adulthood, as long as they use that time to improve their financial circumstances by saving and investing their money. But by taking care of every aspect of a child’s financial life, he or she will never learn these important life skills. Here are a few things that one needs to learn financially as they become adults:

Credit Cards

Many people entering adulthood already have credit card debt along with student loan debt. You may think that this is the norm, and it may well be, but don’t treat it as such. Treat it as an emergency! Having high interest credit card debt will set you back financially. If you have credit card debt which was not accrued paying for life essentials like food and shelter or getting to and from work, immediately cease spending on non-essentials until you have paid off that debt. Contrary to what some may say, credit cards are not inherently evil. A credit card is only a tool. If you pay your balance off every month and having a card does not tempt you to spend more than you usually would, it can be a great tool. (If you cannot handle the responsibility of a credit card then I’d definitely recommend using a debit card/cash only) Many smart users of credit cards earn lots of points which can be redeemed for travel or cash.

Credit Score

Another important aspect of having a credit card and using it responsibly is that it builds your credit score. Why is a great credit score important? You want to buy a house? You get the best interest rates with a high credit score. Same goes for financing a car. You have student loan debt like many this generation do? You better have an excellent credit score if you want to refinance your student loan to a lower rate. You will only qualify for credit cards with the best bonuses if you have a high credit score. Many employers will also check a prospective employee’s credit score.

Budget or Anti-Budget

So you’re an adult now and you’ve got bills to pay. You’ve got to make sure that you have enough money to cover your expenses. If your expenses exceed your income, then you’ve got a problem. Making a budget probably isn’t much fun and many people scoff at it. However, with many online budgeting sites, like Personal Capitaland Mint, it makes budgeting easy to do. No need to break out your excel sheets and list out all your expenses. I will be honest though, I don’t really budget, but instead I have an “anti-budget,” which is a term coined by Paula Pant who blogs at Afford Anything. I list out my expenses and figure out how much I should be able to save. I make sure I save that amount each month and don’t stress about my spending. Whether you decide to budget or use an “anti-budget” will be determined by your personality.

Live below your means

I remember many of my friends who graduated from college and immediately went on a spending spree. If you have a full-time steady job, you probably have more discretionary income than at any point in your life and it’s tempting to inflate your lifestyle. However, it’s in your best interest to continue living like a college student. Buying a new car, expensive outfits or even buying a house does not make you an adult! Like I said above, if your expenses exceed your income, you’ve got a problem. You’re young and saving for the future may be the furthest thing from your mind, but this is the best time to start saving and investing. The magic of compounding works if you give it time, which is why it is important to start early.

Investing

I was talking to a friend, who is in her 30’s about investing, and she said that her mom handles that for her! And, no, her mother is not an investment advisor. Maybe you don’t have an interest in investing, but it’s in your best interest to learn about it. No one will care more about your money than you do, plus it is something that is important for your future financial health, so you might as well learn about it now. How do you expect to save enough to retire if you don’t have a basic understanding of investing? Living below your means and saving is important, but it is not enough! You want to make your money work for you. Stuffing it underneath your mattress won’t earn you anything. Neither will putting all of it in a savings account earning less than 1%. Spend a few hours learning about investing by reading the Bogleheads website or JL Collins’ stock investing series.

Quick Tip: When it comes to paying bills and investing/saving, make it automatic. It makes life easier. When it comes to bills, you won’t worry about late payments. As to investing and saving, it’s a great way to pay yourself first so you avoid the temptation of spending it. It is also a great way to get into the habit of saving and investing. However, make sure to review your statements to make sure everything is correct.

Cooking

Wait, I thought we were only talking about finances? Cooking is an important life skill, and it can also save you a lot of money. Cooking your own food at home is not only more affordable, but it is healthier. Cooking is not rocket science, if I can do it, pretty much anyone can too.

Learn skills

Just because you’re out of college, doesn’t mean you should stop learning. Learning life skills is important, but so is learning skills that will help you advance in your career. Learning new skills is very convenient as you can do it online using Coursera or Udemy. For certain courses, you may be able to receive a certification as well.

Side Hustle

You’re already working a full-time job, who wants another job? Maybe you want to earn some extra cash to build up your savings or pay off debt. Employees are expendable these days so it’s a good idea to have another source of income. Also, having a side hustle might feed your entrepreneurial spirit or passion and possibly replace your full-time income. Having a side job is a lot more flexible nowadays and often will not require you to take a job with set hours. Here’s a list from The College Investor of 50 ways to make a side income. You can also check out a few more ideas from David Carlson who runs the blog Young Adult Money as well as his book Hustle Away Debt: Eliminate Your Debt by Making More Money.

What other financial skills should young adults learn as they transition into adulthood?

29 thoughts on “Successfully Launch Into Adulthood

  1. Biglaw Investor

    I think they should also start learning about taxes. Probably the most basic lesson is that the government uses the tax code to craft public policy, therefore you should be aware that the tax code is set up to encourage you (including young adults!) to act in certain ways. Just understanding that basic principle without even knowing all the details of the various tax advantaged accounts is a helpful head start.

    Next, I’d point out to them the difference between their marginal tax rate and effective tax rate, so they’d start to understand that a dollar saved “off the top” of their income can be more valuable down the road when they pay taxes on it at a blended effective rate. Almost every young adult finds it difficult to save money for retirement, but it’s important to understand these basic tax concepts and to get those accounts open, even if only funded with $100, because it makes it that much easier to contribute in the future (i.e. raises, bonuses, etc.).
    Biglaw Investor recently posted…How to Manage Tax Diversification Like a BossMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      I’m with you on taxes…they’re very important. But baby steps here! Some of us in the personal finance world secretly enjoy learning about taxes, but I’m pretty sure if you get into a discussion about marginal tax rates with someone just started out who isn’t interested in their finances at all…the tax talk will bore them to tears! =) Of course, encouraging them to invest in tax advantaged plans is a must though. That might be the extent of my tax talk to someone just starting out…and then they graduate to more complicated tax concepts!

      Reply
    2. Mustard Seed Money

      I totally agree with you Biglaw Investor. Every young adult should be required to learn how to do their taxes. Learning the basics of how the 1040 tax form works is critical to learning the tax code and how public policy impacts an individuals life.

      By learning to do their taxes, individuals will understand the impact of tax-deferred investment accounts and how that affects their effective tax rate. On top of that, it will hopefully make the young adult on mom and dad for help when it comes to other money decisions.
      Mustard Seed Money recently posted…Saving Money When You Have A BabyMy Profile

      Reply
      1. livingrichcheaply@gmail.com Post author

        I know what you mean. It’s such an important topic which will have a huge impact on how much you can save, but most people don’t want to learn about it.

        Reply
  2. Brian @ Debt Discipline

    I have run across a number of co-workers who are still funding things for their adult children like cell phones and car insurance. One made the comment now that his daughter is getting married I don’t have to pay for these things anymore. I’m all for helping my children, but this seems a little extreme.

    I like the idea of covering basic literacy’s, because believe it or not high school and college are not doing a very good job of this. Communication, working as a team member, networking, resume, interviewing, etc. All things that they will need in the adult world. Cooking and cleaning (laundry) are things we are already showing our teenagers.

    Also knowing that its okay to talk with you about finances is great too and I don’t mean just asking for money. :) If the have questions or run into a problem they last thing you want is for them to be afraid to ask for advice or help.
    Brian @ Debt Discipline recently posted…Financial Literacy MatchmakingMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      That’s great that your teens are already learning skills that will help them in adulthood! Having open communications with your teens about money is awesome. I think too many families think it’s a taboo subject.

      Reply
  3. Laurie @thefrugalfarmer

    Love this, Andrew! I think many families are working so hard to be “there” for their children that they’re not teaching their children to be “there” for themselves. We need to teach kids to become responsible, self-sufficient adults. Love that you mentioned the cooking thing. As the oldest, I grew up cooking meals in our family, but many of my friends who were youngest born knew absolutely nothing about how to make a meal when we were young adults.

    Reply
    1. livingrichcheaply@gmail.com Post author

      So true Laurie. I understand wanting to “be there” for your kids, but teaching kids to be self-sufficient and responsible adults is crucial. There has to be a balance. Ahh…being the oldest often means helping out with the siblings. I can see how the older siblings, especially if there’s a bigger age gap, has to learn more adult skills.

      Reply
  4. James

    Great coverage of parents launching their children into adulthood and the practical skills that are necessary for success. I particularly love that you included cooking. That has definitely become a lost art. I’ve run across a number of young people who are completely lost in the kitchen! Beyond having the ability to cook meals that taste spectacular, as you note, there are physical (health) and fiscal (financial planning) benefits to the practice.
    James recently posted…Income is Down, Tuition is UpMy Profile

    Reply
    1. Vicki@Make Smarter Decisions

      I definitely agree with James here. At college many kids get “conditioned” to eat at “cafes” or food courts – with fancier meals and choices than we could have ever imagined. When I went to college (boy that sounds like it is making me old…) we had a dining hall with a few main hot entrees, and sandwich bar and salad bar. We thought that was amazing. No fancy coffees, or sushi, or… whatever else is offered on campuses. Kids see normal as a $7 or 8 breakfast… Great ideas here!

      Reply
      1. livingrichcheaply@gmail.com Post author

        I used to think that a $7 or $8 breakfast lunch was cheap but now when I realize that I can cook that for less than a dollar…it’s tough paying for it!

        Reply
    2. livingrichcheaply@gmail.com Post author

      Yes, I think people think it’s harder than it really is. At least I thought that. It just takes some trial and error…or just follow a recipe.

      Reply
  5. Lila

    They really should bring home economics as a class back to high schools and middle schools. But you’re right at some point parents should cut the cord! I don’t think it’s “cute” to not know how to cook. Knowing how to cook has definitely helped save me a lot of money! Thousands!

    As for your friends mom to handle her investments? That’s a bit too Grey Gardens for me. I think it’s sad because at this point in her life she should know which investments she likes and what works for her, what happens if something bad happens to her mom?

    Also I think it’s great she trusts her mom but it’s like teaching a child to read, you teach them so they can do for themselves and be independent throughout life and all that jazz.

    Sometimes some parents are so cold, like there’s this model Maggie Rizer. She trusted her dad to manage her finances and he ended up wasting all her earnings.
    Lila recently posted…I will be helping a parent in retirementMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Yes, they definitely need to teach financial skills to kids in school! And you’re right about teaching a child to read, as the saying goes…”Give a man a fish and you feed him for a day…. Teach a man to fish and you feed him for a lifetime.”

      Reply
  6. James

    I still live with my parents even though I am already 25 years old, and I don’t see any problem with that at all as it is accepted in the culture I belong in. Living with them has helped me save more, but I kinda know the situation of being independent, so I am making sure that I am financially ready for these challenges.
    James recently posted…Making the most of the beautiful weatherMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Yea, I think have no problem with living with parents. I did so myself. I just take issue with in when the kids are mooching off their parents and not saving money!

      Reply
  7. Eric Bowlin

    People assume any university will be worth it once they graduate. It’s simply wrong. Most universities charge way too much because there is no limit to spending with student loans.

    Anyhow… I got a credit card when I turned 18 and it had some really low spending limit. I put a few school books or something simple on them and paid them off. By the time I graduated college my credit score was over 750.

    Managing credit wisely can help you in the long run.
    Eric Bowlin recently posted…What To Do When a Tenant is Not Paying RentMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Yes, credit is important! And you’re right, too many people just assume the college degree is worth it no matter the costs. Those student loans can be a huge burden.

      Reply
  8. James

    Side hustle I think so. I didn’t care about side hustling when I was in college. Then, when I got my job, I didn’t like what I was getting, so that was the time I started to look for a side hustle. Later on, I enjoyed it until such time that I got more than side hustles and look for a better stable job where I could still continue working on my side hustles.
    James recently posted…Making the most of the beautiful weatherMy Profile

    Reply
  9. Holly Johnson

    It’s sad when adults nearing retirement have to put their plans on hold to help adult kids. That really sucks because you can’t borrow money for retirement. Most people in this boat will end up working for much longer, and maybe indefinitely. I’m saving for my kid’s college education now so I don’t have to do anything drastic later. If they need financial help later in life beyond that, they can live with me for free but that’s about it.
    Holly Johnson recently posted…What is the Chase 5/24 Rule and Does it Affect You?My Profile

    Reply
  10. DC @ Young Adult Money

    Such great tips here! I really appreciate you mentioning my book, too. Thanks for doing that.

    I don’t have kids but I plan on having them someday and I really worry about trying to control and help them in every area of life despite knowing that this can be counterproductive. Sometimes your kids need to fail and learn through that failure themselves. I’m not sure that taking out a ton of student loans was a “failure” for me, but it certainly forced my wife and I to approach life differently and ultimately it’s been a really positive thing.
    DC @ Young Adult Money recently posted…52 Week Money Challenge Spreadsheet and PrintableMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks! And no problem! I am definitely with you about not trying to control every aspect of an adult child’s life. I agree that it is counterproductive. Sometimes the best way to learn is through personal experience.

      Reply
  11. Kelly

    I am glad that I know how to cook. Cooking is my hobby and it has helped me save much as I can be as frugal and creative as I can get when it comes to cooking. Basically, I can use cooking in my advantage.

    Reply
    1. livingrichcheaply@gmail.com Post author

      It’s a good skill to have! And it’s great that it’s your hobby too so you also enjoy it.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge