Specific and Actionable Money Tips You Can Start Implementing Today!
Guestpost by Sophia from Experlu
Your 20s are the best and the most challenging time to develop sound money habits. You are starting your adult life and start making money but somehow it remains difficult to know how to manage that for the best.
Sophia from Experlu, our guest writer today, will help you with 10 actionable tips you can start implementing now to get your finances in order and work towards your financial goals!
10 Personal Finance Tips For Everyone in Their 20s
Make a budget
Making a budget and sticking to it can help you manage your money effectively. A budget will help you to achieve your financial goals by allowing you to have control over your spending. It will enable you to focus on your financial goals and help you identify cash flow problems before they even take place.
You can make a budget by following simple steps:-
- Without determining your net income, you cannot create a budget. Your net income is the amount that you get after deducting taxes, social security, etc., from your total salary.
- Track your spending by creating a list of all your monthly expenses. Some of the items you can include in your list are insurance, travel, utility, groceries, childcare, personal care, entertainment, and savings.
- You can categorize your spending on the basis of fixed and variable expenses.
Fixed expenses are the regular mandatory expenses that you cannot avoid. These include expenses on childcare, mortgage payment, internet service, car payment, and more.
On the other hand, variable expenses vary from month to month, and there is a scope of cutting back on them. A few examples of variable expenses are groceries, entertainment, gifts, personal care, and more.
- You can analyze your monthly income and expenses to see whether you are overspending or saving money. Based on this information, you can set further short-term and long-term financial goals and keep track of your budget.
[Jonathan: Little hack here, call it a spending plan instead of budget, mentally it puts you in control! e.g. I plan to spend 300 on entertainment]
Avoid impulse purchases
Making impulse purchases can drain your bank account quickly without you even realizing it. Impulse purchase means buying something you don’t intend to.
The best way to save money while buying something is to wait for a few days. This waiting period allows you to reflect on that purchase and assess whether that purchase will add to your quality of life or not. If you still want to buy something after the waiting period, then it’s worth your money.
Another way to avoid an impulse purchase is to create and stick to your budget. Budgeting allows you to avoid the temptation of impulse buying and remind you of your financial goals.
Set smaller goals
Setting smaller goals reduces the chances of you giving up on your goal. Smaller goals have a limited time frame and can help you adjust your spending habits without feeling overwhelmed.
Short-term financial goals are the milestones that allow you to stay motivated and stick to your financial planning. That’s why focusing on short-term goals along with the big goals makes it easier to stay on track.
[Jonathan: I love this one!]
Understand the interest rates
Understanding interest rates can help you determine which debts you need to pay off first, which credit cards you should avoid and which savings account is financially better for you.
For example, it is better to repay the loan having a high-interest rate first in most cases. This method is called the debt avalanche method and is useful for saving money while repaying debt.
Making investments as early as possible can help you to reap the benefits of compounding. This is because the time value of money is constantly increasing over a period of time.
Therefore, compounding returns on early investments allows you to reap huge benefits in the long term.
Specific financial goals
Setting financial goals in terms of numbers and dates instead of using just words can help you accomplish them effectively. Quantifying your goals allows you to prioritize goals more and tackle them efficiently.
For example, the goal “I will repay 25% of my debt by the end of this month” is more specific than the goal “I will repay my loan.”
Know your financial position
Evaluating where you stand financially can help you track your progress towards your financial goals and prevent backsliding. You can assess your financial position by calculating your net worth (the difference between your assets and debt). Having an idea of your net worth helps you understand where you stand financially and what measures you need to improve your position.
Consistent savings is the key
Making savings a part of your monthly budget can help you to keep your savings consistent.
You can make consistent savings in the following simple steps:-
- Estimate your monthly expenses to plan how to spend money and avoid overspending.
- Set short-term and long-term saving goals so that you can easily follow them.
- Prioritize your savings goals to keep your savings regular. For example, you can set a target of saving 20 percent of your income every month.
- Review your savings plan monthly so that you can spot any shortcomings on it and take timely action. Seeing how much money you’ve saved will also inspire and motivate you to keep your savings consistent.
Multiple streams of income
Having multiple sources of income rather than being dependent on just one income source can help you improve your financial situation.
Having multiple streams of income has the following benefits:-
- It allows you to make more money than you would from just one source.
- Multiple sources act as financial protection in case you lose one source of income.
- It helps you to reach your retirement goals early.
- Numerous streams allow you to become financially more stable.
Appreciate what you have
Instead of running after the things that you don’t have, learn to appreciate what you have in the present. Your wants and desires are endless. Thus, it is important to be grateful and happy for what you already have.
About the Author
Sophia is a full-time financial writer at Experlu. She is a passionate blogger and loves to share her knowledge on various subjects. Content created by Experlu– are loved, shared & can be found all over the internet on high authority platforms.
I would like to thank Sophia once again for giving us these 10 easy and simple tips. And pay attention, applying these over time will improve your finances significantly!
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