Money is still a difficult topic for many people. However, speaking about finances with your friends or family can make the topic more accessible. It’s hard to start your path to financial freedom, especially as a student or young professional when money is particularly scarce. But even if you don’t earn a lot of money you can still begin your journey. So let’s focus on how you can start as a young professional!
3 Steps to Start Your Path to Financial Freedom as a Young Professional
1. Analyze you spending habits
The first step to financial freedom is always analyzing how much money you spend from paycheck to paycheck. It doesn’t matter if you do it with an app, an excel, or with pen and paper. Make a list of your utilities, shopping, grocery bills, rent, the pay-off for loans, and basically everything you spend money on. After you track your spending habits for 2-3 months you have an average amount of money you need. And when you know what you need on average you can compare it with your income and figure out which spending habits don’t make sense for you and where you want to change something. After that, you can start setting a budget for your spending. If it’s easier for you, you can split this budget into sub-budgets for grocery shopping, restaurant visits, fun times with your friends, and so on.
2. Figure out what your beliefs around finances are
The next step is figuring out your mindset around money and finances. What thoughts come up when you can think about money and how do they impact you? Your belief system around money and finances most likely developed during your childhood. What have your parents, friends, or movies taught you about money? Maybe you always heard that people with a lot of money are evil, and as a result, it’s hard for you to save money or invest. Reflect on your beliefs, how they limit you, and figure out what you need to work around.
3. Set up a plan to save money
The third step is setting up a plan to save some money. It’s important to build some reserves, for your future goals. Most literature on finances agrees that 10% – 15% of your income from every paycheck should be saved for a rainy day. However, not everyone is able to save that amount. In the end, it matters that you do something. Set up “money for a rainy day” as a part of your budget. If you can’t save 10% – 15% of your income start with 5 euros/dollars. You can set up an extra bank account to which you automatically transfer a certain amount of money every time you get paid or do it the old-fashioned way and put it in an envelope. I’d recommend doing it immediately after you receive your pay. You don’t save whatever is left over but rather what your analysis has shown what you can spare.
If you save for a special occasion like a vacation, a degree, or a designer item your savings plan changes, based on when you need to reach what kind of target. Nevertheless, this shouldn’t impact your rainy day savings but rather your spending.
Finances is a topic not easily accessible because most people aren’t taught in school. Especially young womxn struggle because we often learn that finances are a man’s world. Don’t let this belief hold you back. Everybody needs to learn how to handle their finances by themselves. When you start your journey to financial freedom make sure to find a lot of different credible sources, so you can build up your own knowledge. The same goes if you are interested in investing. I hope these 3 steps help you to kick off your journey.
Do you have any questions or stories to tell? Reach out via: shecareerblog@gmail.com
Before you leave make sure to check out our blog posts about negotiating your salary or the still existing gender pay gap.
Be right back,
Ally
PS: I am not a financial advisor.
