How to manage your finances like a grown-up and avoid money worries

You are an adult now. Stop relying on friends and family to bail you out; stop drawing on the bank of mum and dad; stop blaming others, or circumstances, for your situation in life. Get your finances in order and do the basics right. You’re all grown up now; time to act like it!

Good money habits and successfully managing your finances are a foundational element of being a responsible and smart grown-up.

This means living within your means and budgeting. It means doing the right things regularly and without fail, like paying bills on time. It means making smart decisions like avoiding unnecessary debt. It means also keeping one eye on the future by saving and investing.

Whether you are aiming to get out of debt, saving to buy a house, putting money aside for your retirement or striving for financial independence, you should also plan for, and make provisions for, life’s unfortunate events which are outside of your control. These could otherwise easily derail your family’s financial security and any future ambitions and dreams.

Handling your finances like an adult isn’t necessarily always fun. In the long run though it can be liberating and gives you choice and freedom. Managing money like a grown-up is the only way to alleviate money worries permanently and unlock a bright financial future.

Stop living pay-check-to-pay-check

Living on the edge is incredibly stressful. Always worrying about money and how you are going to pay the bills. This is the unfortunate reality for too many people due to poor money management, high expenses, bad financial habits, and debt.

You need to start managing your money like a grown-up and escape the cycle now because living pay-check-to-paycheck is a disaster. While it isn’t always easy, some things to consider include:

  • Spending less than you earn (this is obvious but key)
  • Establishing an emergency fund or savings pot to handle the inevitable little emergency, repair or unexpected bump in the road
  • Tracking your spending and working to a budget
  • Avoiding impulse buys and trying to delay any purchase decision (after only 24 hours you might realize you didn’t need it after all)
  • Reducing your expenses, especially your fixed costs
  • Eliminating debt
  • Automating savings and paying yourself first!

You may need to make some short-term sacrifices to break the cycle of living paycheck-to-paycheck. Establishing responsible financial habits will improve your physical and mental wellbeing, eliminate money worries and open up future options. This should be a priority!

Avoid unnecessary debt

Debt encourages you to spend more than you can afford. It costs you more money and can be crippling if not controlled. People often turn to debt to cover small expenses or short term money shortfalls, but unfortunately this can quickly snowball and get out of control. It gets harder and harder to escape this debt trap.

Being a grown-up about your finances means that you learn to only spend what you can afford. This doesn’t exclude using credit cards, but it does means paying them off each month. You shouldn’t just make the minimum payment, and don’t carry a credit card balance!

The same principle also applies to bigger expenses like student loans, car purchases or buying a home. For most of us it’s unrealistic to think we can pay for these without some kind of loan. However, it is important to seriously consider how much debt you are committing to and ensure you prioritize repayments. For example, consider whether you really need a new car or whether an older car might suffice. Look in detail at the financing terms and interest rates. Don’t extend yourself beyond your means just because someone will lend you the money. Just because you can doesn’t mean you should.

Managing money like a fiscally responsible grown-up means avoiding unnecessary debt. If you’re not careful it can be very costly and easily spiral out of control.

It is worth noting that not all debt is bad. When you have control over your finances, the leverage debt provides can be an important tool in accelerating and extending your wealth. It’s a strategy responsible adults with good financial habits use, but for many people debt should be looked at with caution and avoided if possible.

Establish a will

Yes, it feels like death from old age is a long way away; yes, you feel bulletproof and are in good health……but unfortunately you never know when your time is up. That’s why responsible adults have a will.

A will is a legal document that communicates a person’s final wishes about how to distribute their assets and how dependents should be cared for. This helps avoid potential disputes or confusion about what happens with your estate if you pass away. You can also give instructions regarding the medical care you want to receive if you become incapacitated or seriously ill and cannot communicate your preferences.

Without a will, you have no control over how your assets are allocated. You can’t leave money to non-relatives, exclude particular relatives or direct money to charity. If there is no will and no relatives, any assets will go to the state. Even what happens with dependent children will be left to the courts.

Unfortunately, according to a recent survey, almost 60% of people do not have a will or living trust. The numbers get much worse at younger ages, with 79% of Millennials not having a will and over 60% for Generation X.

The top answer as to why is “I haven’t gotten around to it”. That’s just lazy and irresponsible. Procrastination is not a valid excuse.

Okay I admit contemplating your own mortality isn’t fun, nor might some of the discussions you’ll need to have around what might happen if you pass away. But you need to get to a lawyer and set up a will now. This is especially important if you have a family or a home. Even if you don’t have many assets or consider yourself rich, it is still important to name a guardian for kids.

Insure yourself and your assets

Unfortunate events happen. The reality is very few people live a charmed life where nothing goes wrong. Car accidents, bathrooms flooding, fires, weather events, getting sick or injured are commonplace events and potentially financially crippling.

Being a responsible grown-up regarding your finances means that you need to protect yourself and your family against things and events you can’t control. You need to mitigate that remote but material risk. To do so you need something more than an emergency savings account. Accidents and health events do and will happen and if you aren’t adequately insured, they could leave you in financial ruin.

Types of insurance you should consider include:

  • Health insurance to cover medical costs
  • Life insurance, which can provide your family with financial security if you pass away
  • Home and contents or renters insurance to protect your major asset and possessions
  • Motor insurance to cover your car
  • Travel insurance, primarily to cover medical costs rather than lost baggage

You might consider other insurance protections depending on your individual circumstances, like disability insurance. It always amazes me that people are somehow more willing to protect their physical assets than their own health and income-earning ability. Pet, vision and dental insurance are also covers that might make sense.

Insurances that I personally avoid are things like extended warranty type covers or gadget insurance. These are normally expensive for the protection you obtain and cover possessions that are not financially catastrophic if lost.

Insurance is often a grudge purchase for many but will give you peace of mind when you have the protection in place. Insurance allows you to protect an enormous downside for little cost in comparison. Financially responsible grown-ups have insurance!

Liberty and financial freedom

Being a grown-up regarding your finances not only minimizes money worries and stress but also unlocks the possibility of financial independence. This is an achievable scenario where you have enough income to pay your living expenses for the rest of your life, without needing a job or the financial support of others. The time and opportunity to pursue your dreams and ambitions. Choice and freedom. Sounds good right?

The basics outlined above lay the foundation for this exciting future. You need to stop living paycheck-to-paycheck. You need to budget, save and invest. You need to insure against the big, potentially crippling exposures and tragedies. Make the sacrifices to be a reponsible grown-up about your finances and you’ll reap the rewards. Take action now!

Thanks for reading

Mr Simple Life


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7 thoughts on “How to manage your finances like a grown-up and avoid money worries

  1. A nice, no-nonsense, post that gets to a solid foundation. Good job.

    I’m guilty of not having a proper will…I still feel young, but, 120 years ago I’d be a senior citizen (or dead) already.

    It may have been Jack Bogle who said it – either way I read it somewhere – but I find it helpful to picture debt as future income being extracted from that future, and pulled through to the present. That, by definition, means you’ll be poorer in the future because of the debt decision (all things being equal). You need to ask yourself if being poorer in the future for this purchase/decision is worth it…because this likely means you’ll be less happy in that future as well if the purchase wasn’t worth it.

    Liked by 1 person

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