Your 20s are perhaps the most exciting time of your life. You’re not only out of college, living on your own, and financially independent, but there’s a lot of room for growth and change—and uncertainty.
It’s important that you focus not only on spending money and having fun with your friends, or lose yourself in your career or education, but that you also build sustainable, valuable financial habits that you can carry into the future. Starting young not only helps you stay more firm in your financial security but gives you time to rectify and avoid mistakes that could harm your credit score in the long-run.
Here are some of the best habits to develop and master while you’re in your 20s:
1. Learn the art and skill of budgeting
Budgeting is a valuable lifelong skill that often goes underappreciated. The sooner you learn to budget and plan how to spend for the month, the better it is for your future. Plan ahead to factor in bills, utilities, monthly payments and installments, and anything else you need to, setting clear boundaries on where your money goes. If you don’t, you’ll be blowing through your paychecks without even realizing it and have a hard time in the future.
2. Work on debt elimination and reduction
The average college graduate has $30,000 of student debt to pay off, and it’s important that you start thinking about eliminating and reducing this debt. It’s not possible to pay everything off right away, of course, but having a clear debt-reduction strategy and plan makes all the difference.
3. Start to save a set percentage each month
In addition to budgeting and reducing debt, save a part of each paycheck each month. Even a small amount such as 10%-20% of your income, or a few hundred dollars that you can spare, makes a difference over time. Save any extra cash, bonuses, rewards instead of spending them.
Additionally, start saving for emergencies and unexpected or irregular expenses (travel, holidays, presents), and begin adding to your retirement fund in your 20s too. It might seem too early, but future, you will thank 25 year old you.
4. Know where to draw the line on spending
Yes, it’s important that you indulge and enjoy your money too; traveling, dining out, partying, investing in new clothes are all some of the things you should be doing, but in moderation. Stick to eating at home whenever you can, cooking for yourself to save more, traveling smart, or investing in a side-hustle to make extra money for these pleasures. But knowing where to draw the line is an important lesson that you need to internalize.
5. Start seriously building your credit history
This is a practice you need to hold onto closely. Building your credit history is an important part of financial freedom and stability and one that has long-term impacts on major life decisions, including home loans and mortgages, buying a car, starting a business, and much more. Our credit repair consulting experts can help you repair your credit score and teach you how to make smarter decisions regarding this. Get in touch with us to know more about how we can help you.
The sooner you learn to manage your money and improve your financial habits, the better your future will be.