Welcome to the Real World: Understanding Needs, Wants, and Goals

18-24: Young Adults

May 2024
Premier America

Stepping into adulthood—or "adulting" can be thrilling yet daunting. One of the biggest challenges you'll face in your early 20s is managing your finances. Unfortunately, not everyone receives a formal education in personal finance, leaving many young adults to figure it out on their own. Whether you're just starting college, entering the workforce, or setting up your first apartment, understanding the basics of budgeting is essential. We are here to guide you through different types of expenses and show you how to prepare for the financial demands of adult life.

Adulting 101: Know Your Expenses

The foundation of personal finance is knowing where your money goes. Every savvy adult uses a cash flow statement to track their spending, which can be broken down into three categories: fixed, variable, and periodic expenses. Understanding these can help you plan and avoid financial stress.

Fixed Expenses

Fixed expenses are those that do not change from month to month. These costs are predictable, which makes them easier to budget for. Examples include:

Rent/Mortgage: Likely your most significant monthly expense, keeping a roof over your head.
Phone Bill: Essential in today’s digital age for both work and social life.
Car Payment: If you own a vehicle, this is a regular expense.
Subscriptions: Whether it’s streaming services, gym memberships, or software, these fees recur like clockwork.

Variable Expenses

Variable expenses can fluctuate based on your lifestyle and choices, which makes them trickier to predict and control. Examples include:

Gas: Costs can vary, especially if you travel a lot or prices spike.
Dining Out: Eating at restaurants can quickly add up.
Groceries: Essential but can vary depending on diet and how often you cook at home.
Clothes/Shoes: Necessary, especially if you’re starting a new job or need to update your wardrobe seasonally.

Periodic Expenses: The Occasional

These are expenses that don’t occur monthly but can still have a significant impact on your budget. They require foresight and sometimes a bit of savings discipline:

Tuition: An investment in your future that comes due at the start of a semester.
Vacation: Everyone needs a break, but it needs planning.
Home Expenses: From furniture to repairs, these costs crop up occasionally.
Unexpected Car Maintenance: Always good to have funds for this inevitable expense.

By understanding and planning for these types of expenses, you’re setting yourself up for fewer surprises and more success. Remember, the goal of managing your finances isn’t just to save money—it's to create a lifestyle that allows you to achieve your dreams while being prepared for the unexpected. Embrace your financial journey with confidence, and remember, we're just a conversation away whenever you need guidance or support. Welcome to your new world, where every financial decision is a step towards your personal goals!