Most people stress about money to some extent. It just never feels like we have enough... why is that? Because money, whether
we like it or not, is one of the biggest factors affecting our
lives every day. The amount you earn determines the food you eat, the clothes you buy, the type of people you hang
around, etc. Now the question becomes, do you want to control your
money or do you want your money to control you? I think we can agree that we want to be in charge of our financial success!
To be financially savvy, you have to make an effort
to educate yourself and create realistic goals then take the steps to achieve them. Financial planning can be a challenge at any age
but it tends to be more difficult the younger you are. Maybe you’ve only recently become
financially independent of family and aren't very confident in your
self-sufficiency yet. You are probably paying
off student loans or other debts while your checking account
teeter-totters each month and you may not even have a savings account, or it is minimal.
Fortunately, with a little research and foresight, you can significantly
improve your financial standing and take back control of your situation, sometimes even in just a few months.
Here’s how:
1.
Develop a monthly budget.
Learn how to develop a detailed, realistic budget here.
2. Have a monthly savings plan.
No matter your income, you have
to save a consistent amount of money each month. Learning how to live
within your means is a necessary life skill and will make the difference
one day in an emergency situation.
The ideal savings rate is 30% of one’s income, but that can be
extremely difficult. A good starting place is to save $20-50 per
paycheck and automatically transfer it to your savings account.
Whatever number you choose to begin with, steadily increase it
each month. I.e. if you start with $25 per paycheck in September,
increase the amount to $30 per paycheck in October, etc. If you can
only spare $10, save $10. The crucial thing is getting started and
adjusting to the habit of saving. You can do it!
2.
Stay on top of your credit score.
Check it at least
quarterly. Building credit is a slow process in your 20s, but a vital
task for future buying power. Make sure you’re paying off your credit
card each month or at least the minimum balance.
3.
Know what credit cards are best for you.
If you’re score is lower than you like and/or you’re searching for your first card, consider a few things:
a.
Is this a card that I want to have long-term?
Credit is strongly influenced by how long you’ve had individual credit
lines open so it’s important to maintain at least one credit card for
years to come.
b.
Is there a decent sign-up bonus? Most competitive
cards out there offer something, from travel rewards to cash incentives
for signing up for their card. It’s worth the time to shop these
options when comparing cards.
c.
What is the APR? The annual percentage rate is how
much interest you’ll be charged on the overdue balance. If you always
pay off your card in full you will not have to worry about this. If you
pay the minimum balance or partial payment,
the rest with be multiplied by the APR and you will be charged that
amount as interest. You can see the math here:
http://www.wikihow.com/Calculate-the-APR-on-a-Credit-Card. Frankly, credit cards are an expensive way to borrow money if the balance remains unpaid. Don’t make a habit out of letting
your balance carry over.
d.
Is there a yearly cost? These cards are often not
sustainable for 20 somethings as we are not usually big enough
spenders. Annual fee cards may still be a solid option for you if you
do charge a lot monthly. Usually this would be people
with families or many monthly expenses.
P.S. The best sign-up
bonuses are almost always attached to cards with annual fees. Most often, the first
year’s fee is waived to hook people in. If the bonus is generous and
you don’t need this card long-term to build
credit, it may be worthwhile to apply for it and enjoy that bonus.
Just make sure you plan ahead to cancel the card before the fee comes
next year!!
4.
Finally, save where you can.
Order online, look up free
activities in your area, buy used. Thrift stores can be your best
friend and I mean far outside the realm of Goodwill. Some of the best
thrift stores I’ve been to support specific causes
that people are passionate about, like the humane society or women’s
rights. People feel strongly about these causes (I know I do!) and are
generous with their donations. Plus, it’s like a treasure hunt every
time and it never fails that I encounter something
cool/vintage/strange that is fascinates me. Thrift stores can be
great for everything and anything, but they have especially wide
selections for books, furniture, appliances, glassware and, yes,
clothing. You can (and should) reward yourself for saving money.
Create a spending budget for your shopping trip and if you spend less,
treat yourself to something small with half leftover amount and put the
rest in your savings account :)
Hope these tips help you take control of your
financial situation. Keep an eye out for an upcoming post on investing
in your 20s.
Thank you for reading and leave a comment below with your thoughts or questions :)