Are you good with money or is your spending out of control? Now you’ve reached your 20s it’s time to ditch those bad money habits and learn some good financial habits to help you manage your money, save well and meet your long-term goals. Keep reading to see if any of these habits sound familiar and find out how to turn them around. Achieving better money habits is easier than you might think!
- Not keeping track of your money
Being responsible for your personal finance is an important part of adulting. If you don’t know how to manage your money then you can wind up not meeting rent payments, slipping into debt and taking out further debt to pay off the original debt. Before you know it you could be moving back home to live with mom and dad and asking them to help you out, not a good look!
The first step in developing good financial habits is to create a simple budget that clearly shows your income and expenses so you can understand exactly what money is coming in (salary) and how much is going out (rent, power, internet, food etc). Using a money app can make it easy (and fun!) to keep track of your personal finance.
What’s leftover is ‘me money’, money that’s your own to use however you like. Of course you’ll want to use some of this for fun stuff, but if you follow the 50/20/30 budget you should also save 20% in a separate high interest savings account.
- Failing to save money
Being able to save is a crucial component of creating good financial habits. Even if you’ve never saved, don’t consider yourself a saver or hate the thought of it, you’re probably aware that it’s a good thing to do. Being in your 20s is a great time to build wealth because time is on your side. In 20 or 30 years you’ll be so glad you did.
You might have the best intentions in the world but it’s really easy to get tempted to spend your ‘me money’. That’s why you need to set up an automatic payment to transfer a set amount each week into your savings account. It’s a foolproof way to manage your money and you won’t even notice it’s gone.
- Overspending on bills
Did you know that you can save hundreds of dollars a year, simply by making a few small adjustments to the way you use energy? Hands up anyone who’s left the heater on all night or forgotten to turn off a tap when they went to work. We’re all guilty of this from time to time, but consistently racking up unnecessary charges on your utility bill will mean less ‘me money’ and it’s not good for the planet.
There are lots of different ways to lower your utility bill including using LED light bulbs, employing passive heating and cooling methods in winter and summer, and switching off electrical appliances at the wall when you’re not using them.
- Impulse spending online
Often we learn how to manage money from our parents. So if mom or dad is into shopping online to get a bargain, then you’ve probably picked up their bad habit of impulse spending. Impulse spending, though it makes you feel good at the time, can quickly ruin the good financial habits you’re trying to adopt.
The urge to spend can feel totally overwhelming when you’re shopping online but remember you’re the one in control of your credit card. You can overcome impulse spending and create better money habits by instigating the 15 minute rule. Whenever you feel the urge to spend set a 15 minute timer on your Smartphone and do something else to take your mind off it.
After 15 minutes the initial impulse should have lessened enough for you to delete all the items you want in your shopping cart, and only purchase the items you really need.
- Limit Your Credit Card Usage
Be responsible with how you use your credit cards. A good rule of thumb is to only spend up to 30% of each card’s limit, and then pay off the charges monthly. Closing credit cards is not advised, as your credit score will be affected each time you close one.
These tips should help you on your way to creating good financial habits, don’t worry if you slip up now and again, you’re only human. Just make sure you get back on track as quickly as possible to minimize any serious damage to your savings.
Angela Pearse is a blogger for Zumper who frequently combines travel with freelance writing. She’s passionate about Art Deco hotels, historical novels, Netflix, hiking and healthy living.