OPEN A ROTH IRA: This is a retirement savings account that allows your money to grow tax-free. It’s a great way to save for retirement if you’re in a high tax bracket. Even if you don’t have a full-time job yet, part-time work can help you save in a Roth. Just make sure it’s not more than you’ve earned.
Learn how to budget
We wish we had known about the power of compounding interest and budgeting for long-term goals. We also wish we had been taught how to budget our money better so that we could have saved more money in college. Budgeting is a skill that everyone should learn, especially young people who are just starting out in life. Learning how to budget your money can help you save money and reach your financial goals.
There are lots of different ways to budget your money. You can use a traditional method like the envelope system, or you can use a digital budgeting tool like Mint or YNAB. Whichever method you choose, the important thing is that you stick to it.
If you’re not sure where to start, there are plenty of resources available to help you learn how to budget your money. You can find books, websites, and even classes that can teach you the basics of budgeting. Once you learn how to budget, you’ll be on your way to reaching your financial goals.
Build an emergency fund
When it comes to personal finance, one of the most important things you can do is build an emergency fund. This will help you cover unexpected costs in the event that something unexpected happens, like a job loss or a medical emergency.Ideally, your emergency fund should be enough to cover at least three months of living expenses. If you don’t have an emergency fund, start by setting aside a few hundred dollars each month until you reach your goal.
Pay off your credit card in full every month
One personal finance hack that I wish I’d learned in college is to always pay off my credit card in full every month. For years, I only made the minimum payment on my credit card balance, and it felt like a never-ending cycle. If I had known about the power of compound interest, I would have been much more diligent about paying off my balance in full every month.
Now that I’m older and wiser, I realize that carrying a balance on my credit card is one of the worst things I can do for my financial health. Not only am I accruing interest on the balance, but I’m also damaging my credit score. If I had known this in college, I would have been much more careful about using my credit card.
If you’re struggling to pay off your credit card balance, I highly recommend trying the debt snowball method. This is where you focus all of your energy on paying off your smallest balance first, and then once that’s paid off, you move onto your next smallest balance. The momentum from paying off your first debt can be really motivating, and it can help you get out of debt faster than you think.
Check out the perks of a good credit score
A good credit score can save you money in a lot of ways. For example, if you want to buy a car, a good credit score can get you a lower interest rate on your loan. And if you want to rent an apartment, a good credit score can help you get approved for the rental and even snag a lower deposit.
But a good credit score isn’t just about saving money. A good credit score can also help you get a job. That’s because more and more employers are now doing credit checks on job applicants. So if you have a good credit score, it can give you a leg up in the job market.
So if you’re not already monitoring your credit score, now is the time to start. And if you need help boosting your score, there are a number of things you can do. You can start by paying your bills on time and keeping your debt balances low. You can also try to get a mix of different types of credit, such as a credit card, a car loan, and a student loan.
Bottom line: A good credit score can save you money and help you get a job. So if you’re not already monitoring your credit score, now is the time to start.
Watch the lifestyle creep
One of the biggest financial mistakes you can make in your twenties is lifestyle creep. Lifestyle creep is when your spending gradually increases as your income grows. It’s easy to do because you think, “I’m making more money now, so I can afford to spend more.” But if you’re not intentional about your spending, you can end up in a lot of debt.
To avoid lifestyle creep, be mindful of your spending and make sure your expenses are in line with your income. When you get a raise or a new job, don’t immediately start spending more. Instead, put the extra money towards savings or investing.
Lifestyle creep can be a tough habit to break, but it’s worth it in the long run. If you can avoid lifestyle creep, you’ll be on your way to financial freedom.
Figure out how to balance paying off debt with savings goal
One of the most important things I’ve learned is to balance paying off debt with saving for goals. It’s easy to get caught up in the minimum payments, but it’s important to also focus on building up your savings so you have a cushion in case of emergencies.
One way to do this is to set up a separate savings account for your goals. This way, you can see exactly how much you’re saving and it’s less likely that you’ll dip into it for everyday expenses.
These are just a few of the things I wish I’d known about personal finance in my twenties. It’s never too late to learn, and the more you know, the better off you’ll be. Thanks for reading!
