Am I the only one who thinks that finances are the biggest downside of being an adult? Like, let’s go back in time to before I had to pay bills and take out loans for stuff. It’s the worst. Unfortunately, it’s something we all have to learn to navigate. Plenty of people wait until their 30’s to figure it all out, but you’ll definitely thank yourself if you start learning these financial habits in your twenties!
Start a Budget
Budgeting is, like, the first step you should be taking for your finances, the most basic of financial habits, and it’s definitely a habit that will become more and more essential as you get older. Here’s the way I started my budget (I use a spreadsheet). I added one column that is my “ideal month”. I started with my set payments such as rent, loans, utilities, cell phone, etc. Then I added in a row for each of the monthly expenses that vary month to month, such as groceries, eating out, spending money, etc. I set a spending goal for each of those, based on what I had spent in previous months. There’s never a month where I’m spot on with every category, but at least I have a general budget to stick to so I know almost exactly how much I’ll spend versus save each month. Each month I go through and fill in actual spending so I can compare that to my goal.
If you’re not big on the idea of doing your own with a spreadsheet, there are plenty of apps that will help you create a budget!
Build Your Credit
It’s not exactly breaking news that you should be working on building your credit. It’s going to become essential when it comes to buying a car or house, or even for renting an apartment! Your credit is only going to become more important as you get older, so it’s absolutely better to start building it right away! If you aren’t already, start monitoring your credit to get an idea of where you are, as well as to make sure you’re aware of any changes. Make sure you make every single payment on time, whether it be your credit card, your rent, medical bills, etc.
Build a Savings
When you’re saving for a specific purpose, like a house or a vacation, it can be easy to motivate yourself to put money away. When you’re not saving for a specific item or under a deadline, it’s harder to know how much to save and to motivate yourself to do so. However, it’s still super important to be building up an emergency fund! I recommend deciding on a specific amount you’d like to save each month and move that money into your savings account as soon as you get paid. If you tell yourself you’ll put what’s left at the end of the month into savings, you’re probably more likely to spend the money on something else. I have an automatic transfer that goes from my checking account to my savings account the day I get paid each month so I never even have to think about it!
Set Financial Goals
How many times have you found yourself thinking “I would love to buy a house” or “I really want to get my credit paid off”. If you’re anything like me, it’s all the time! We all have financial goals we want to meet, but the key is to turn those goals into plans. If you have specific financial goals you want to meet in the near future (a large purchase, or perhaps a savings goal), make a plan for yourself for how much money you’re going to put away each month toward that goal. Having financial goals is great motivation for savings because you know what you’re working toward!
Save For Retirement
In our twenties, retirement is the last thing on many of our minds. It might seem silly to have money taken out of your paycheck each month for retirement when that money could be going toward other things. As silly as it may seem now when retirement is decades away, I promise someday you’ll be glad you did it. You won’t regret taking your future into your own hands. The great thing about getting a job post-college is that your employer very well might have a retirement plan that they’ll contribute to! Check with HR and see how much your employer is willing to match. I recommend maxing that out!
Cut Unnecessary Purchases
I cringe looking back at the amount of money I wasted in high school and college. In high school I had a job and literally no expenses, so all of my money went toward clothes, useless crap, eating out, going to movies, etc. In college, I had more expenses, with rent and utilities, plus grocery, textbooks, etc. However, my student loans covered all tuition and many of my living expenses. So I still had plenty of money to play with, and I assure you I wasted most of it. Now that I have infinitely more bills and monthly payments, I kick myself for not saving more of that money. I think the line between necessary and unnecessary becomes much clearer when you’re out in the real world! There are better things you could be doing with that disposable income, such as paying off debt or putting it away for an emergency.
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Limit Additional Debt
If you’re in your twenties and out of college in the last few years, chances are you’re drowning in student loan debt like the rest of us. So the last thing you want to do is pile on additional debt! Now that I’m already paying off student loans and a car loan, the last thing I want to do is add an additional monthly payment to that. I still use my credit regularly for the rewards, but I continue to pay it off each month. Credit card debt can spiral out of control quickly, and now is the time to stay on top of it!