Learn how to budget your money, save for emergencies, and become the master of your financial dreams with these tips! This is a guide for the twenty-something in all of us.
Your twenties are a great time to develop good money habits! These personal finance habits can be carried out throughout your life, and the sooner you start the sooner you will be well on your way to your financial goals.
1. Create a Budget.
Budgeting is the most important thing you can do to keep a grip on your finances. A budget will help you figure out where your money is going and what you need to do to make it stretch through the month. There are many different ways to create a budget, from using an app, creating a spreadsheet with income and expenses, or even using a finance notebook. Find what method works best for you and then get started!
2. Do Not Spend More than You Have.
This is an easy one in concept, but with credit cards and other loans it is easy to think “I can afford the monthly payment” and forget that all those monthly payments add up. Add to that a persistent “treat yo’self” mentality and it is easy to unintentionally spend more than you have. Instead of cutting all your excess spending all at one time think of these tips as small progressively bigger steps. If you are spending more than you have look at your budget (your actual budget using actual numbers from your actual bank statements). Everything is assigned to a financial category and you can cut excess spending by ranking your needs and wants to making cuts to a couple of the lower ranking wants.
If when you do this exercise you find that you need to boost your income then it is time to consider some passive-income strategies and other ways to bring in more money.
3. Pay Your Bills on Time.
Make it a habit to pay all of your bills on time. If money is tight, this may seem like an impossible feat, but there are ways to make sure this happens. Pay bills electronically, set reminders on your calendar for all of the due dates, and make sure you have enough money in your account to cover them. If something unexpected does come up and you need a little extra time to pay a bill, call and ask for an extension instead of waiting until it is past due. You will build good credit by paying on time and it will save you from any late fees or finance charges. This can be a lifesaver when you are crafting your budget each month.
4. Set Specific Financial Goals.
Setting financial goals is crucial to achieving them, no matter how big the goal may be. Financial goals should be written down and kept somewhere that is easily accessible as a constant reminder. Make sure to set deadlines and measure how well you are doing towards your goals so that they can always be revised as necessary.
5. Start Saving.
Saving is the foundation of financial stability, and it needs to happen at all stages of life. Set up an emergency fund and begin saving for future goals like children’s education, buying a house, or starting your own business. Don’t feel like everything has to be saved at once; slowly begin building up the funds so that you are always prepared for an emergency. Even if it’s just $5 or $20 per paycheck in case of an unexpected car repair or damaged appliance, every little bit counts when starting out.
6. Pay Down Debt.
It can be difficult to pay off debt when it continues to grow before your eyes. Creating a debt plan will help with this problem. A debt plan includes the money that you are currently spending, your income and bills each month, and a payment schedule for paying back all of your outstanding debt. This makes it easier to set goals for yourself by working towards them every month. Also, make sure to pay more than the minimum on your debt each month to avoid finance charges, compounding balances, and high interest rates. Do not add any new debt when you begin paying off old debts either. Financial advisor Dave Ramsey says that once the emergency fund is set up, take all extra funds and pay down your debts, starting with credit cards because they are the most expensive form of debt.
7. Limit Impulse Shopping.
Impulse spending is one of the largest financial problems, especially when it comes to shopping for clothes or beauty products. Make a list and stick to it when you go shopping so that you don’t buy anything extra during your errands. Also, go shopping with a set amount of cash so you don’t overspend using a debit card. It is much easier to spend more money when you are not thinking about the money that is being spent. It can be helpful to find other ways to avoid impulse spending, such as going on a digital detox from time-to-time where you cannot access your social media accounts, or even leaving your cards at home when you want to shop.
8. Start an Emergency Fund.
An emergency fund is money that you keep in a separate account from everything else that can be used in case anything goes wrong with finance or your life. For example, if you get in an accident and lose your job at the same time, then this money can be used to pay your bills while you search for a new income stream. The general rule is that one month’s worth of finance should be kept in savings to cover unexpected issues like these.
9. Have a Retirement Plan.
This one is a fun one because you get to dream of what you want your retirement to look like. Maybe you want to travel the world or maybe you want to be able to start and build a business. Whatever it is you want to be able to do, experience, or be you can get there one step at a time.
By knowing where you want to go you can break it down into smaller bite-size pieces that work for where you are at now. And remember that you can meet with a financial advisor and build good financial habits with their help. A common misconception is that financial advisors all require minimum financial assets or income. A good financial advisor will help you learn good habits and set you onto the path to earn those asset levels they like to see for financial wellness. Remember that this is all part of a financial journey and not only about the destination. The key to achieving that is finding a balance.
10. Set Saving on Autopilot.
Setting up an easy automatic transfer from your checking to savings account is a great way to save when you are traveling or if you just forget about the money that comes in every month. One of the best things about finance is that you can make saving money automatic, making it easier to achieve your goals. It can be very difficult to save money when you don’t make it a priority. Putting a percentage of your paycheck into savings is one of the easiest ways to build up an emergency fund and start saving for financial goals. Even 1-5% off adds up when you consider every paycheck you are adding to savings.
Imagine how many times you have impulse bought a $5-$10 item. Just like those purchases add up all those savings deposits add up as well.
11. Educate Yourself.
Just like building a muscle you need to flex those financial muscles if you want to be in tip top financial shape. One way of doing that is reading books or other articles (like this one) that teach you different ideas and tips to flex your financial muscles in new ways.
Some of these books can be on saving, some on budgeting, some on investing, and collectively you will be expanding your knowledge and putting your best foot forward toward achieving your financial goals. If the thought of reading a bunch of books intimidates you then start small. Just like those savings goals, your learning goals can be broken down. 5-10 pages of a book a day add up and while you won’t be reading novels in a day at that pace you will still be learning valuable information to improve your financial future.
12. Separate Your Accounts.
It is a good idea to keep personal and business accounts separate from each other. This makes it easier to identify what you need to work on financially, as well as the type of spending that may be going on in certain areas of your life. For example, writing down how much money goes into the “entertainment” category each month could show you if your social life is more expensive than it needs to be. This information can help with budgeting and finance planning, so knowing where your money is going is a good idea.
13. Positive Money Mindset and Relationship with Money.
It may not feel like it when things get tough, but being positive about finance and money is so important to your success. If you think that nothing will work out for you, then it probably won’t. But, if you believe in yourself and finance, then anything can happen. Staying positive when things get tough makes it much easier to overcome any financial obstacles.
14. Bust through Limiting Beliefs.
Just because you have a strong finance mindset doesn’t mean that there aren’t going to be times when things get tough. For example, one of the biggest obstacles that people face is that they don’t know if finance is right for them or not, or if it will really work out in the end. If this problem applies to you, then remove finance from your life for a week or two and focus on something else. Then, make finance the main focus of your life for the next 7 days. If finance is not what you want to do with your life, then it will be easy to see at that point. Take action by setting goals and working towards them every day. You will see finance in a different light after you take action every day instead of every once in awhile.
Your twenties are a great time to develop good money habits! These personal finance habits can be carried out throughout your life, and the sooner you start the sooner you will be well on your way to your financial goals. It doesn’t matter if you are saving for emergencies, investing in stocks or bonds, buying insurance coverage, or even starting an emergency fund- these tips can help pave the way towards success. If this article has helped motivate you to make some changes with how you handle money then please share it with others who may also need encouragement!
Whether you’re a twenty-something or not, developing good money habits now is the key to your financial future. These personal finance tips can be carried out throughout your life and even if it seems like time has passed by, these habits will take you where you want to go! Follow my blog for more tips on how to live your best life as I explore all things related with finances, lifestyle, fashion, and beauty.