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Navigating Financial Independence: 10 Essential Tips for Young Adults

Entering college or moving out on your own for the first time is an exciting phase of life, but it also comes with newfound financial responsibilities. Whether you're the new kid on campus or a young adult taking your first steps towards independence, managing your finances effectively is crucial. To help you navigate this unknown terrain, our experts share their favorite financial tips to set you on the path to a secure financial future.

1. Create a Budget - One of the first steps towards financial independence is creating a budget. Jodie Wall, Senior Vice-President for Union State Bank (USB), emphasizes the importance of this step: "Budgeting gives you control over your money. It's the foundation of financial success."
Start by tracking your income, including any scholarships, part-time jobs, or allowances. Then, list your expenses such as tuition, rent, groceries, transportation, and entertainment. Ensure that your expenses do not exceed your income and adjust your spending accordingly.

Don’t forget to allocate a portion for discretionary spending but be mindful not to exceed it. Mindless spending can derail your financial goals. Regularly reviewing and adjusting your budget will help you stay on track. "Use budgeting apps or journals to track your expenses. Identifying spending patterns helps you make informed choices and cut unnecessary costs," explained Wall.

2. Save Wisely - Save a portion of your income consistently. Amber Groene, USB’s Director of Treasury Services, advises, "Aim to save at least 20% of your income. Even small contributions add up over time." Setting up automatic transfers from your checking to your savings account can make this easier.
3. Be Frugal - Being mindful of your spending is key. Prioritize needs over wants and learn to live within your means. Opt for cost-effective alternatives like cooking at home rather than dining out frequently. Experiment with simple recipes and meal prepping to curb unnecessary spending on dining out.

Take Advantage of Student Discounts. While in college, make the most of student discounts on textbooks, software, public transportation, and more.

4. Build Credit Responsibly - Building a good credit history is essential for your financial future and can pave the way for future financial endeavors such as renting apartments or applying for loans. Brad Bryant, Market President for Union State Bank’s Arkansas City market "Use credit wisely. Pay your bills on time, avoid maxing out credit cards, and keep your credit utilization low."

Consider a secured credit card or becoming an authorized user on a parent's card to begin establishing credit. But keep in mind that credit cards can be a double-edged sword. "If you choose to use a credit card, pay off the balance in full each month to avoid high-interest charges," suggests Bryant.

5. Negotiate Smartly - Whether it's your first job or a rental agreement, don't hesitate to negotiate terms. Studies have shown effective negotiation can lead to better starting salaries or more favorable contract terms. Research and approach these discussions with confidence to place yourself in a better financial situation long-term.
6. Consider Part-Time Work or Internships - Supplementing your income with part-time work or internships can help cover expenses and provide valuable work experience. "Part-time work can provide a solid foundation financially and offer an opportunity to acquire the skills sought after by employers as you enter the work force fulltime," says Merresa Hanson, USB’s Director of Human Resources.

7. Understand Student Loan Debt - For college students, understanding and managing student loans is crucial. Look for scholarships, grants, or work-study programs to reduce your reliance on loans, and consider making interest payments while in school to prevent accruing more debt.

"Stay informed about your loan terms, interest rates, and repayment options. Before taking out loans, explore options with lower interest rates and flexible repayment plans,” advises Brittany Welch, Executive Vice-President and Chief Credit Officer for USB. “Also, be sure to research scholarship opportunities in your community and through your college of choice to help reduce the amount of student loans you need to obtain.”

8. Emergency Fund - Unexpected expenses can arise at any moment. Start building an emergency fund to help you navigate unforeseen circumstances without resorting to debt.

Michael McWhirt, USB’s Executive Vice-President and Chief Risk Officer, recommends, " An emergency fund acts as a safety net. Having three to six months' worth of living expenses saved can be a financial lifesaver in emergencies."

9. Invest for the Future - Begin investing early, even if it's a small amount. Compound interest is a powerful tool for building wealth. Seek advice from a financial advisor to discuss low-cost options.
10. Learn Financial Literacy – Your financial situation can change quickly during the early years of independence. Continue to educate yourself about personal finance. As your financial situation evolves, seek out experts, training opportunities and educational materials to help guide you with sound financial practices for the years to come.

Navigating financial independence can be both empowering and challenging. By following these expert tips and practicing good financial habits early on, you'll be better prepared for a secure financial future. Remember, financial responsibility starts now; embrace it to pave the way for a prosperous future.

About Union State Bank: Founded in 1908, Union State Bank has banking locations serving communities of Arkansas City, Newton, Udall, Winfield, and Wichita in Kansas and in Bartlesville and Edmond, Oklahoma. Union State Bank offers a full range of electronic, deposit and cash management services, as well as business and agriculture, commercial real estate, construction, mortgage, residential and consumer loans. Member FDIC. Equal Housing Lender, NMLS# 412388. Disclaimer: The advice provided in this article is for informational purposes only. It is recommended that individuals consult with financial professionals for personalized guidance on credit management.