When you’re in your twenties, it’s tempting to leave worrying about big things like retirement, financial choices, and house payments for an older version of yourself. However, the truth is that the spending habits you start during these years will be crucial to your chances of success later in life.
No matter what you plan to do in the years ahead, the following tips for money management in your 20s will help you to make the most of your early years and reduce your risk of dangerous spending. Keep this advice in mind the next time you consider your budget.
Control Wayward Spending
During your twenties, there’s a chance you find yourself spending more recklessly than you would later in life. After all, you tell yourself that you’ll have time to save for the things you need later. However, responsible spending early in life is crucial to financial health. Tracking how much you spend now on things like entertainment, groceries, and dining out can help you to see where your problem areas are and begin to cut back.
When you’re looking for ways to curb your dangerous spending, start by forcing yourself to overcome the impulse to buy. This means that whenever you’re going to make a substantial purchase (over $40), you wait 72 hours before you buy. This way, you’re less likely to go back and spend on things you don’t really need.
Focus on Automating your Savings
The quicker you start saving for your long-term goals, the better off you’ll be. Of course, determining how you’re going to convince yourself to spend money when there are so many things that you want right now can be difficult. A great way to simplify the process is to automate your saving habits. Simply speak to your bank account and ask them to send a portion of your monthly income to a savings account each month.
This way, you’ll begin to build a significant savings pool, and you won’t even need to think about it. Just make sure that you’re not tempted to go and tap into the money that you’ve saved when you’re running low on cash.
Build Your Credit
Your 20s is the perfect time to start really working on your credit rating. If you don’t have one yet, then you might find it difficult to apply for the loans you need later in life – even if you’re just applying for things like a mortgage or car finance.
A good way to start building your credit is to start with a simple credit card that doesn’t force you to pay a lot of interest. Alternatively, try looking for a credit builder loan that you can pay back regularly each month. Remember to compare the prices of your loan online, so you’re not paying any more than necessary for your interest.
Save for Retirement
When the promise of retirement is still decades away, it can be difficult to tell yourself that you need to have a pension on the horizon. However, remember that it takes a long time to build up a substantial nest egg. Starting to save early will mean that you have plenty of income to tap into later when you don’t want to worry about going back to work.
If you’re not sure how to make the most of your retirement, try speaking to an expert about your options. Remember, it’s a good idea to take advantage of your employer’s contributions if they offer things like a 401k match. Remember, maxing this offering out means that you’re getting your hands on free money for when you’re a little older.
Save for Emergencies
Finally, make sure that you budget a small amount of your income aside each month so that you can begin to build an emergency fund. This will be the money that you can tap into when something goes wrong, and you don’t want to max out your credit card or break into your other savings.
You never know when you might find yourself needing to pay for a new car or deal with unexpected hospital expenses. Just because you’re young now doesn’t mean that you’re invincible. An emergency savings pool will ensure that you’re ready for anything – even if you end up losing your job and have no incoming money for a few months. The amount you should save for emergencies is up to you, but most experts recommend having at least 3 to 6 months of income aside.