How to Manage Money in Your Twenties
“When you create a plan for your money, you’re giving your money a purpose. ”
There is no time better than now to build solid financial habits! What does that even mean? Keep reading and I’ll help you figure it all out.
The steps include controlling spending, building credit and saving money.
Control Spending
Responsible spending is the foundation for financial health. The rule of thumb suggests spending 50% of your income on necessities and 30% on wants, allocating the remaining 20% to savings.
By tracking your purchases you can see exactly where you stand. You may notice that you’re overspending on either groceries, dining out or even just pure fun. This will help to pinpoint where exactly you may need to cut back in one or more areas.
A personal trick I like to utilize to manage spending is waiting 72 hours to make an impulse buy when it comes to large purchases. This allows you time to think about how the purchase would fit into your overall budget and the value it might add to your life .
“67% of millennials said emotions cause them to spend more money than they can reasonably afford. ”
Save Regularly
There is no one way to go about saving money. Saving is unique to each individual and their specific circumstances. To simplify the process, have part of your paycheck deposited directly into a savings account. This is personally my favorite way to save and the advice that I give anyone asking for my opinion on how to begin saving money.
Your first savings priority should be establishing an emergency fund large enough to cover at least three months’ worth of living expenses This is not something that will grow overnight. Start by setting smaller, more attainable savings goals, like $500, and grow it from there.
Don’t be discouraged if unexpected expenses force you to tap the fund. It’s meant to be used and replenished. And, much like a budget, the goal amount shouldn’t be static. It’ll rise or fall as your circumstances change.
Build Credit
Most of you, if not all of you are finished with school at this point. Now is the time to focus on the adult grading system - your credit score.
A high score can help you qualify for loans with low interest rates, which is crucial if you plan to buy a house or a car. Even if you intend to rent for the rest of your life, many landlords use credit checks to assess prospective tenants.
If you don’t have a credit history, start building your record by opening a secured credit card!
To improve your credit score, try focusing on spending within your means, keeping your level of revolving debt — such as credit card debt as low as possible, and paying bills on time. Automating payments will help. Pro TIP: Many student loan servicers offer a 0.25 percentage point rate reduction for borrowers who use auto-pay.
A few skills to remember:
Create regular budget meetings for yourself
Shop with a list and plan before you buy
Pay yourself first (Savings)
Track your progress
Check your credit report regularly
Last but certainly not least, it is SO important to find the right balance between working, saving, and enjoying your life. Take time to relax regularly. It's even OK to treat yourself - just make sure that you are saving enough of your income to be comfortable and properly plan ahead!
This is a difficult skill to develop, but essential if you want to be financially successful. It's OK to mess up along the way. Just learn from them and keep going.