Four Smart Tips for Finances In Your 20s
Four Smart Tips for Finances In Your 20s
By Aurora McCausland
Your 20s are often a confusing period of time. You’re an adult, but you’ve only recently been thrust into the adult world without a lot of resources to take care of yourself. You’ve been told to figure things out on your own. Suddenly, you’re expected to know things that you were never taught, like how to balance your budget, how to pay taxes, and to manage your time. When you throw things like savings accounts and retirement funds into the mix, it’s enough to make anyone’s head spin. Here are a few tips to make you financially savvy in your 20s.
First things first, is your budget. Your budget is how you’ll know where to allocate your money, and ensure that you’re able to pay all of your expenses every month. For a lot of people, a budget is a really stressful part of their money management. The approach that you choose to take is dependent on your relationship with money and how comfortable you are with your abilities. Some people choose to simply just pay their bills as soon as they come in, keeping an eye on their bank balance to make sure they don’t dip into the negative numbers. Others, choose to carefully calculate every paycheck and divide it into necessary categories such as food, entertainment, and utilities. Dabble in all of it, until you find a budgeting type that works for you and what motivates you. A lot of people find that it is helpful to find an app that will help them budget without thinking about it too much! One great app is Mint, as it can help you make financial goals, as well as let you know when you exceed your budget in a certain area.
How to do more with less
An important part of budgeting is learning how to make a small amount of money stretch further. There’s no denying that money management is an incredibly stressful part of life. When evaluating your finances, look for places that you can save a bit of money. For instance, are you spending a lot of money to rent a large or luxurious apartment, when you don’t need that much space? Finding an affordable place to live is a great way to cut your living costs. Another option, if you’re renting, is to look for a roommate to come and live in the spare room, and help you split the cost of rent. If you own a home, consider renting out your guest room on Airbnb.
Buying groceries instead of eating out is a great way to save a lot of money. Think about how much you spend eating out. Even getting fast food will cost you around $10 per meal. After a week, that’s $140 if you eat out twice a day. Instead, you could buy a weeks worth of groceries for one person for $50-$100 and not only save yourself hundreds of dollars a month, but you’ll also end up eating better food that also tastes better. There’s nothing wrong with eating out, but it should be reserved for special occasions or moments when you really don’t have the time to cook.
A lot of millennials have come to terms with the idea that they’ll work till they die, and won’t have the opportunity to retire. However, if you are aware of how much you’re saving, and have a designated retirement fund, you won’t have a problem retiring when you’re 65! What’s important about saving for retirement, is setting up a retirement fund instead of just putting your money into a regular savings account. Why? Simply, a retirement IRA has higher rates of interest, and therefore, your money will start to duplicate itself much faster than a regular savings account would. Another great tip is to save a part of every paycheck. Even if it’s $5. Five dollars doesn’t seem like very much. And yes, it’s enough to buy you a latte. But if you save $5 from every paycheck, you’ll save $520 every year. Again, this isn’t a lot of money, but that’s better than an empty savings account, right? Another method is to save up any cash you come across, since many of us don’t carry cash around, and put that straight into a savings account instead of using it.
InvestmentsInvesting is a smart move at any age, but especially when you’re young. However, investing seems like a difficult move and it’s no wonder that few young adults dabble in investments. A great place to start is to find an app you like that automatically invests for you. Another great way is to pick a few funds from your 401(k) lineup, and invest in those! You can always move things around, and even if you only have a few extra dollars a month, you can start investing and watch your money grow quickly over the years.