Adulting involves learning things you’ve likely never done before. It’s a weird stage in life where one minute you’re celebrating your hard-earned paycheck, and the next, you’re panicking over the most mundane things like laundry and taxes.
Here are three essential skills you need to pick up to become a smart, responsible, and financially savvy adult.
1. Reading pay stubs
Congrats on getting your first paycheck! You’ve worked hard for that cash, so it’s important that you know where your money goes. Checks usually come with pay stubs indicating details like benefits, taxes, and wage deductions. Reviewing your pay stub ensures that all your information is updated and that you are receiving the correct amount every cutoff.
The topmost part of your pay stub contains your identification. This includes your name, address, Social Security Number, employee ID number. It also features your employer’s name and address.
“Earnings” indicates the amount of money you made and your total work hours during a certain pay period. It also shows your hourly pay rate and overtime earnings. “Taxes” indicate your deductions like federal income tax (marked as “FedTax” or “Fed Withhold”), Medicare, and social security.
The “tax data” or “tax filing status” section identifies your marital status and any allowances you and your dependents get. “Pre-Tax Deductions” identifies benefits like dental and health care. It also includes any contributions to savings and retirement plans you invested in. Some pay stubs include “After-Tax Deductions,” for employees with applicable union dues and garnishments.
2. Filing tax returns
Most employers withhold money from their employees’ paychecks for taxes. In this case, you’re entitled to a refund. The problem is, you can’t get refunded without filing a tax return.
If it’s your first time to file one, you’re likely to use form 1040. This document applies to single individuals or married couples filing jointly with no dependents, and whose income is under $100,000. It’s a single-page form that can be filled out in less than an hour.
Once you’re done, you can opt for e-filing which is faster and more convenient than mailing your forms to the IRS. You can also hire authorized tax filers to complete and submit your forms electronically for you.
3. Using credit wisely
Credit cards often get a bad reputation, but they can be a key tool for long-term investments. A good credit history can increase your chances of securing car loans and home mortgages. Most credit cards also let you enjoy rewards programs, longer warranties, and purchase protection.
Avoid debt by always paying your monthly balance in full and on time. Most purchases entail a 15% interest can pile up over time and bring you more debt. Avoid careless spending and practice self-control.
Avoid balance transfers and cash advances as they usually come with hefty fees. Master your card’s terms and monitor your balance regularly to avoid over-limit penalties.
While adulting can be stressful at times, it’s also one of the most liberating experiences of your life. There’s no wrong or right path to maturity, but knowing the basics can help you enjoy the ride.