Finances are a huge part of life that many young adults have trouble understanding. When you’re young, keeping track of your finances or making long-term financial decisions doesn’t seem like things you should worry about; in reality, not making financially smart decisions as young adults is something that many people regret later in life. That’s why it’s important to start making smart decisions when you’re young. Here are some financially smart decisions that young adults should consider making.
Going to College
Though college costs a lot of money, many people are glad they spent the money on their degree in the future. Some even say it was the smartest decision they could’ve made, while others say it’s a decision they regret. Is college a smart financial decision?
- Pros: Getting a degree has a huge impact on your future. In fact, people who get a bachelor’s degree earn an average of $1,137 a week, while those who don’t early $678 a week on average. Even with the expense, there are many ways to cover these costs: loans, grants, and scholarships are available to college students so they can pay the expenses.
- Cons: However, college takes more than four years for a lot of people to get. That’s thousands of dollars extra students need to worry about paying to finish their degree. Some people don’t quite realize the price difference between public and private colleges as well, which can cost them thousands of dollars they otherwise wouldn’t have to pay.
Before deciding on a college, consider your options. Are there other choices you can make that don’t require a college degree and align with your interests? If you do decide to go to college, you can do so in a financially responsible way: choosing an affordable school, seeking out financial aid, and working while in school to pay off expenses.
Buying a Home
About 15% of people say that buying a home was the best financial decision they could’ve made. Owning a home is a huge life step, but also a huge investment—for some people, it’s a decision they deeply regret.
- Pros: When you buy a home, you earn equity on it; have a home long enough, and you’ll own the house completely. It can be a source of income as well if you decide to rent out spare rooms, and if you bought your home at the right time, selling could get you a decent profit.
- Cons: Homebuying isn’t without its risks. If you use it as an investment, it can backfire spectacularly like it did in 2008. Buying also has a higher monthly cost than renting does, and you’ll have a decently-sized downpayment to worry about in addition to home maintenance.
Still, home buying can be a financially smart decision if you do it right. If you don’t plan on moving from an area, then buying is cheaper than renting in the long-run. When you do buy, make sure you don’t buy at a price higher than you can afford—your mortgage shouldn’t be more than 28% of your monthly income. Buying a fixer-upper can be smart, too, since the property’s value will increase as you repair and update the house. That way, when you sell the home, you’ll gain quite a bit of money back.