There are so many decisions to make in your 20’s.
Do you study?
Head overseas for some once in a lifetime travel?
Get married and start a family?
Whichever direction you decide to go one thing is for certain, it all costs money.
Therefore, it’s a great idea to start developing healthy money management habits now so you’ll have money for later down the track.
Read on as we show you how you can do this.
Follow These Financial Management Moves
1. Stay On Top Of Your Spending
Responsible spending is the key to saving money and developing healthy money management habits. To start getting a grasp on how much you spend try giving the 50/20/30 budget a go.
What is the 50/20/30 budget you ask?
It’s a fairly straight forward concept.
Simply add up the monthly wage that you take home after tax and divide it into 3 different categories.
The first category makes up 50% of your monthly wage and involves portions of your budget you simply can’t go without, things like groceries, rent, utilities, debt repayments, or insurance.
The second category makes up 20% of your wage. This portion should be dedicated to saving towards an emergency fund or retirement.
And the last 30% of your monthly wage can be spent on wants. Things like eating out, buying new clothes, or perhaps catching a movie with your friends.
2. Save As Regularly As Possible
This is the hardest part of budgeting, actually saving money. With everything else going on in your life it can be hard to muster the motivation, or simply remember, to transfer money out of your spendings account and into your savings account.
To simplify things why not set up an automatic transfer once a week or once a month. That way you don’t have to remember and you probably won’t even notice it’s gone.
Aim to save enough money to cover yourself if the worst happened. A good starting point is to save enough to live on for 3 months, then aim to save for 6 months, and then, if you can manage, save 12 months of worth of living expenses.
This will help you in numerous amounts of ways.
It will take the stress out of any unforeseen expenses that may raise their ugly heads, you can relax knowing you always have money stashed away if you ever need it, and, the best part, you can use this money to travel when you feel like you need an escape.
3. Live Within Your Means
As tempting as it is to live above your means, it’s definitely not the best move. While you are young it’s ok not to have too much money, you may feel like you are being judged by others because you aren’t driving the nicest car or wearing designer branded clothes but this often isn’t the case.
People of middle age and older all know what it is to be in your 20s. Money is tight and that’s perfectly fine.
Therefore, it’s the best time to save. You don’t need to get a big car loan, you don’t need to eat at the most expensive restaurants, and you certainly aren’t expected to be wearing a Rolex.
Living within your means now will allow you to live a better lifestyle down the track.
4. Save For Your Retirement
Retirement may seem like a lifetime away, and really that’s because it is. However, that doesn’t mean you shouldn’t start saving for it now.
The sooner you start saving the better.
As an example, if you are a 25-year-old, saving a measly $100 per month and getting a return of 8% with quarterly compounding, you will save about $345,000 by the time you hit retirement age.
Try not to think of saving for retirement as taking money out of your spendings, instead, try to view it as a paycheck that will simply come decades from now. This way it will make it much easier to commit money to an account that you know you won’t be touching until you are much older than you are now.
5. Look After Your Credit History
Establishing a good credit history can be vital to you later on down the track. A high credit score can help you qualify for loans with much lower interest rates than if your credit score wasn’t so good.
Even if you don’t plan on buying a house anytime soon, it is still a good idea to maintain a good credit score. A lot of landlords now use credit checks to assess whether you are a suitable tenant.
And if your credit score isn’t so good and you need to raise it?
Try to focus your spendings towards paying off your current debts as quickly as possible. Paying bills on time, not racking up late fees, and keeping your credit card spendings to a minimum will all help to erase any bad credit history and help get your name back in the green.
6. Pay Off Any Debt You May Already Have
Debt is, unfortunately, a necessity for a lot of young adults. However, allowing your debt to hang around longer than it needs to, or worse grow, is something you’ll want to avoid. Having large amounts of debt or debt that is accruing high interest can set you back years later down the track.
Therefore, it’s a good idea to work out a debt plan to pay it off as soon as you possibly can.
And if that means consolidation or refinancing your debt then do so.
Consolidating the money you owe and only paying one institute is a much better strategy than paying interest to several money leaders. Make sure to shop around also, find a leader that offers a low-interest rate so you can pay off your debts as soon as possible.
Another great strategy for managing money in your 20s is to employ the help of Emma.
Emma is a money management app that will help you keep on top of any overspending.
She will help you take control of your finances and debts, ensure you aren’t wasting your funds on things you don’t need, she will help you avoid any nasty banking fees, and assist you in getting your credit score back into shape.