Adopting good money habits in your early twenties is something that will put you ahead of the curve. Why? The earlier you start having a good relationship with money, the more you will have in the long run.
The truth is, too many twenty-somethings are not taught how to handle money.
So many millennials walk around exclaiming the importance of making memories and living in the moment. “I will always be able to make money! Might as well enjoy my life while I am young!”
Ok, you can choose to live that way. But, you will regret it in your thirties when you still have a poor relationship with money.
Most likely, your savings will be low. You will have to work wayyyy harder than those around you to pay your bills. Overall, you will be filled with anxiety and overwhelm.
Having a good relationship with money will set you up for the long run in life. Stop pushing off learning good financial habits. You will NOT regret it in 10…20…30+ years.
I am going to share with you five major money habits you should form in your twenties.
1. Stay in Your Financial Lane
Create a budget plan
Actively write out or type up a plan that you will stick to throughout the year. Break it down monthly and include all of your expenses (rent/mortgage, loans, car payments, groceries, utilities, etc). Write out the numbers so you actually SEE THEM. Then, account for money you plan to save or invest. After that, take a look at the number left. That number is your spending money. Do with it what you please. Unless there is an emergency, do what you can to NOT go over this number. Treat your budget like a contract or a business.
Live below your means
Having a good relationship with money means living below your means. Not even “within” your means. Why is that? Living within your means makes many people feel like they can spend what they make, as long as they do not go over. But, when you live below your means, it gives you more of an opportunity to put money away. A little here and there greatly adds up. Even if you save $50 a week. By the end of the year you will have $2,600 saved up.
2. Start Investing Your Money Immediately
Think of the big picture
Too many twenty-somethings are thinking about money in the moment. Maybe a year from now. But, not much past that. HUGE mistake. From the time you get your first job, you should set a plan for the future. How much money will you need to retire at…55…60…65? Whatever your plan is, the amount will be based on the lifestyle you will want to live when you are no longer working. Figure out how much you need to put away in X amount of years to reach that goal. Then, work towards that.
Retirement plans & personal investments
Take advantage of any retirement plans and incentives your company offers. You can also invest outside of work. Get a financial advisor and figure out where to begin investing to prepare yourself for the future. Don’t wait for your thirties. You will lose thousands in missed investment opportunities that way.
3. Use Your Savings Account Seriously
It isn’t just a money holder
A mistake twenty-something’s frequently make is that they use their savings account as an ATM. They put money away and feel so good about saving for about 5 minutes. Then, they want the shiny new thing and their savings account transforms into an ATM machine. Stop that! Train your mind to look at it as if you can only take out money if there is an actual emergency. No, that trip to Cancun is not an emergency. Or those cute jeans.
When you’re planning your budget, your savings needs to be something you consider. Maybe you can afford to put 40% away each month, or… maybe 10%. Choose a minimum amount you will actually commit to putting into your account each month. But, let’s say you are having a good month. The car didn’t break down and you were a homebody most weekends. Dump your extra “spending” cash into your savings. Watch the money pile up.
4. Take Care of Your Debt ASAP
Set up automatic payment
It is really important to pay your bills on time. What happens if you don’t? Well, you will most likely have penalty fees. Also, if it is a credit card, watch your credit score dramatically decline. Get your bills on automatic payment! Most bills you will have to pay allow this feature to be set up. These companies want their money! So, get your loans, credit cards, mortgage/rent, car payment, and utilities set up so you don’t have to worry every month.
Overpay your monthly payment
If you owe any people or companies money, pay them off as soon as you can. Why? Money you owe is money you do not have. If you have $10,000 in the bank and owe $2,000 to a friend and $28,000 in college loans, you are $20,000 in debt. So, instead of paying $150 every month for your college loans, try for $300 if you are able. Viewing your money this way will make you less likely to spend money on things you do not actually need. It’s kind of like pretending you are broke. This will put you in a much better financial situation as compared to others that live as if they are rich when they are not.
5. Buy Expensive Items that are Timeless
Expensive Items you will need
In your twenties you will go through many transitions in your life. Unless you choose to live at home with your parents (hopefully not your entire twenties…), you will be buying some heavy hitter items to begin adulting. You will need bedroom furniture, couches, a kitchen table and chairs, rugs, and maybe even a car. It is great if you stick within your budget, but you want these items to last you a good amount of time. So, don’t be impulsive when spending money on these items.
The problem with buying trendy
The issue with buying expensive items that are trendy is that… well, they are just that. A trend. Choose to purchase items that you like, but that you can see yourself liking in 5-10 years, too. A big money mistake is to buy a bunch of expensive items that are popular in the moment. Then, a few years later, you feel the need to purchase new items because what you originally bought is “played out” and not in style anymore. Choose expensive purchases that are timeless and are practical.
Click the link below to get a list of 10 simple, yet effective ways that you can save money daily!
What habits have you formed around money?
Do you use any of these habits?