Everyone wants to live fun in their twenties but setting yourself up for a lifetime of success starts with making smart financial choices.
It can be easy not to take control of your finances at a young age, but even if you are in an entry-level job you can achieve your goals into your 30s. Buying your dream house or car can be achieved if you put thought and effort into how you live.
Luckily, there are a few key budgeting tips that people in their 20s should know to set themselves up for success. Here are the things to keep in mind when creating your budget.
1. Build Your Credit
If you want to qualify for top financial products like credit cards and loans, you’ll need to establish a good credit score. This can take years so the sooner you start, the better. If you do get a good credit score, you will save thousands of dollars on interest in the long run.
This is hard for a lot of people to do because you need to have some credit history in order to qualify for a credit card. An easy option is to become an authorized user on the account of a family member’s credit card. If you don’t have this option, you could try to apply for a secured card, which works like most cards but requires a deposit of typically about $200.
There are a few other options that can help raise your credit score without opening an account. Experian Boost is a free feature that links your positive payments for streaming services or other bills, which can help boost your score.
2. Create a Budget
To get all of your finances in order, it’s important to create a budgeting guide that can track how much money comes in and out. When it comes to creating a personal finance guide, there are plenty of online resources that can help. Once you find a template that works for you, you should be able to change your spending habits or income.
It may be hard to stay frugal, but make sure you stick with your goals to ensure that you never spend more than you can afford. If you share finances with another person, make sure that both people are held accountable and have access to the information.
3. Create an Emergency Fund
If you establish the habit of securing an emergency fund to cover unexpected expenses that may arise, it can save you from having to take out an emergency loan. It can also prevent carrying a big balance on a credit card. Things like medical expenses or home repairs can happen at any moment.
Experts recommend to try and keep three to six months of expenses in a fund but with the coronavirus and changing markets, that may be hard to do. Instead, try to keep as much as you can save after you pay all of your monthly bills. This way you are realistic and not feeling stressed to meet certain numbers.
Keeping a high-yield savings account will allow you to save in real time and build interest. These accounts limit the number of times that you can withdraw money to help reduce the temptation of pulling money for non-emergencies.
4. Pay Off Your Debt
Student loan or credit card debt can accrue interest and pile up faster than you realize. This is why it should be your main priority to pay those off as soon as possible. Having these types of debts can also bring down your overall credit score by increasing your utilization rate.
This can result in lenders thinking you may be a credit risk and reducing the chance of qualifying for other items. Debt consolidation is a method that some people use to minimize the number of accounts that you pay every month and can offer lower interest charges than your average credit card.
5. Practice Good Money Habits
Each person has different contributing factors that can influence their finances. For example, if you frequent a business, you should get a cash discount card if you can. This way, you can get a discount when you use services with cash instead of a card or credit.
You should also get into the habit of checking your finances regularly and switching to a no-fee checking account. This can help you make sure to spend within your ability so you can avoid racking up debt or interest charges. This is also a way to ensure that you spot fraud in case it happens to you.
There are also ways to optimize your credit cards by joining rewards programs. These are tailored to your spending habits to offer rewards on items like gas, groceries, eating out, and even traveling.
Follow Budgeting Tips For a Successful Future
Being proactive with your finances and considering ways you can build positive habits is incredibly important in your 20s. It can help you build the life that you picture and be able to enjoy life along the way, too.
If you start by following the budgeting tips, here you will work toward a good credit score, living debt free, and saving a fund that you can use for the rest of your life.
If you want to find more tips or advice about life success and finances, check out our blog. There are a lot of articles that can help you transform your life.