DO YOU SPEND MORE THAN YOU EARN?
DO YOU SAVE SOME AND SPEND SOME?
WHERE DID YOU GET YOUR MONEY HABITS?
As a teenager, things are new and exciting; we’re still learning new topics in school, and we’re navigating changing friendships and new loves.
In college or university we’re surrounded by people who want to learn, encouraged to participate and try new career topics.
Then come our 20’s, an unnerving but exciting time to hone in on who we are, explore, and reach new potentials. It’s our first step into adulthood, a time when we begin to figure out how we want to live and how to get there, or the structure of a rigid schedule, it’s a time when we can develop new habits that will help us throughout our life.
You know how the saying goes: Bad habits are hard to break. But sometimes it’s harder to create good habits – especially good money habits. Well it’s not too late to change a bad habit especially a bad money habit.
Parents may have not taught you good financial habits at home and school certainly didn’t teach you any.
Did you know that it only takes 30 days to form a new habit if practiced every day.
Although new habits can –and should be – formed at any age, our 20’s are an especially important time. The brain’s frontal lobe is still developing up until your mid 20’s, and as you age, your brain’s ability to learn new skills diminish.
With rising student loan debt, and living costs millennials are struggling to make ends meat let alone putting money away for the future. The KEY to taking control of your finances is to START YOUNG.
Everyone’s life takes a different direction, and no one path is the same, but there are some key habits that can benefit everyone by the time you finish your 20’s, no matter what you do. If you have yet to turned 30, consider adopting these 5 habits, which can help you in all areas of your life now.
- CREATE AND STICK TO A BUDGET
Without a budget, you cannot take control of your finances. A proper budget tells you where you want your money to go – not where you’ve already spent it. Your budget should tell you how much money is going towards mandatory expenses – like rent, student loans etc. and how much is left over to save or spend.
- SET FINANCIAL GOALS
Without knowing what your future financial plans are, saving money and saving enough can be difficult. Long-term goals are important for your future, but setting short-term goals to help save for purchases you’ll need to make sooner than later, like Christmas/birthday presents, a car, are just as important. It will give you a purpose for saving.
- LIVE WITHIN YOUR MEANS
More than 20% of millennials spend more than they earn (according to FINRA Investor Education Foundation).
To truly get ahead financially, you have to live below your means so you can build wealth and reach savings goals. By this I mean you will have to make sacrifices – like skipping that café latte and cutting down on weekend drinking. Reconsider where you eat, how often you eat out and how much you spend on each meal. Really think about where you can cut costs.
- MANAGE CREDIT WISELY
Engaging in costly credit card behaviors – like carrying a balance, making minimum monthly payments and paying late fees. These habits affect your credit score and are costly. If you need to use credit for a purchase chances are you cannot afford that purchase. Pay your bills on time failure to pay on time carries hefty fees, which leaves you less money to pay other bills, it also affects your credit score. Set up automatic payments through your bank just make sure there is money in that account.
- SET UP VARIES BANK ACCOUNTS
By this I mean have at least 4 bank accounts.
Main account: This is for rent, bills living expenses. 50%
Money tree: This is 10% of what you earn and don’t touch it.
Emergency fund: About 20% this is for car \appliance repairs, medical etc.
Don’t ask account: This is the fun account for holidays etc. you decide.
You can set up automatic deposits into each account so you don’t have to worry about missing any payments.
You decide the percentages that go into each account.
One final point STOP RELYING ON PARENTS FOR FINANCIAL SUPPORT
If you have a job but are still relying on your parents to pay for groceries, phone bill, you might need to take the initiative and cut the cord. Adult children who continue to rely on parents as a source of income won’t learn to be financially independent. You could also be hurting your parents’ financial futures, too. Cut the cord now so you don’t have to pay for your parents when they retire.