Guestpost by Cora Gold
Your 20s are when it all happens: graduate college, nab your first grown-up job, get married if you choose, move into a house, and take on whatever exciting opportunities land in your lap. Whatever your life’s path is, it’s essential to learn how to manage your money well and plan for your financial future.
In the United States, the monthly personal savings rate decreased from 7.3% in November 2021 to 6.3% in February 2022*. Individual savings account for disposable income after taxes and money spent. This underlines how critical your financial decisions are in your 20s and their long-term effects.
Creating strong spending habits early on is necessary for preventing debt and saving up for things you actually need. Of course, being so young, you want to spend time going out, traveling, and having a good time in your 20s. Who knows what adult responsibilities you face in the years ahead?
Thankfully, there are ways to do both. Here are eight ways to be stricter with budgeting while still having fun in your 20s.
[Jonathan: *For Europe, it decreased to 14.6 % in the third quarter of 2021 from 17,9% percent in Q2 2021]
Set Budget Goals for Each Month
Although the coronavirus pandemic led to a 32% decrease in expenditures on eating out, Americans still paid over $2,300 on average on restaurants and takeout in 2020. How about your morning latte at Starbucks? Generally, people typically spend a whopping $1,100 on coffee annually or $92 per month.
While you can still eat out and cozy up with a warm, frothy espresso beverage, you might consider cutting back. Set budget goals for yourself each month by accounting for certain costs, such as paying for off-site laundry, rent, health insurance, and other bills.
You can start by taking a hard look at your income. How much do you have left over after budgeting for what’s most important? Better yet, what do you feel comfortable spending on luxuries?
If you come in under your expected spendings one month, you can treat yourself to something fun using the remainder, or set it aside to fund a future vacation.
A budgeting app can help you decide on a suitable amount for dining, entertainment, and other activities and warn you if you get close to overspending each month.
Have Budget Meetings With Yourself
Take time every evening to go over your bank account and budget. Are you staying in line with your monetary goals?
Regularly reviewing where you’re spending your money, what you’re spending it on, and how often can give you a better idea of whether or not you’re sticking to your plan.
Although daily assessment may seem excessive, these check-ins can be extremely helpful when you’re just starting out. Once you become aware of your habits, you can reduce these check-ins to weekly or monthly.
Additionally, if you’re married, discussing your spending habits with your partner is critical to ensure high credit card statements don’t blindside you. Make sure your financial goals are aligned and that you’re each monitoring how much money is going towards large purchases or other expenses.
Find Awesome Deals
As a savvy 20-something-year-old, you’re capable of mastering the art of a great deal. From earning rewards on groceries to clothing sales and even negotiating an excellent price for a new car, there’s nothing you can’t save money on.
Whether shopping online or at the store, you can always score some incredible bargains. Search for coupon codes, find promos for free shipping, look for lower online prices and pick up at the store, try price matching, track price drops, and wait to shop on days when stores roll out major discounts.
Suppose you’re interested in getting a massage, going to dinner with friends, or participating in another activity. In that case, apps like Groupon or LivingSocial allow you to compare prices and take advantage of special deals. You can even do the same for travel discounts.
[Jonathan: Timing my purchases is one of my favorite savings “tricks”, e.g. Buying clothes during the sales period]
Avoid Impulse Shopping
Truth be told, Americans have a shopping problem. According to one survey, 88.6% of respondents admitted to impulsive online buying, spending approximately $82 per session.
In your 20s, the feeling of missing out is all too real. You might catch on to a particular trend, compare your wardrobe to other 20-somethings, or feel pressured to make certain purchases.
However, the key to shopping intelligently goes beyond finding the best deal. It’s important to answer honestly about whether you need something before succumbing to the impulse.
Of course, that doesn’t mean you can’t buy whatever you have your heart set on. However, it does mean you need to make sure you have the funds for that particular item without having to dip into your savings.
Keep the item in your online shopping cart or let your friends know you must mull over that week-long getaway to a tropical island. The best way to prevent impulse buying is to wait a day before dishing out money for any significant purchase. If you’re still thinking about it days later, go ahead and treat yourself. Then be sure not to make another unnecessary purchase for a while.
Take Advantage of Employee Benefits
Once you start working, remember to look into your employee benefits, such as tax benefits, health savings, and retirement plans. Some employees offer employer matching contributions, which you should always take advantage of.
Larger corporations may have different stock options and insurance plans that allow you to invest money for the future as well.
Other employee benefits could include employee perks programs. Perks programs may offer exclusive savings on electronics, home goods and services, groceries, fitness, online classes, and other items you may be interested in.
If you’ve been considering going back to school for a higher degree, 92% of employers offer educational benefits such as employer tuition reimbursement. Tuition reimbursement can help fund an undergraduate or graduate degree.
[Jonathan: Good one and often forgotten, look if your company has any deals. We had one with the local gym at my previous employer for example]
Do you plan to rent an apartment or buy a house or car sometime soon? These are fun milestones if you’re in your 20s. However, without a good credit score, you’ll have difficulty achieving these things.
Having excellent credit will benefit you when applying for low-interest loans, and many landlords will also look at your credit history. If you don’t have a credit score – because you’ve never made credit card purchases – you should start sooner rather than later. Just make sure you have the financial means to pay them off.
[Jonathan: The UK also has a credit scoring system, for the rest of Europe each country has a different system, in my experience as long as you do not have bad consumer debt and sufficient income you should be eligible for a loan.]
Set Long-Term Financial Goals
Your 20s are meant to be fun, but that doesn’t mean you should set aside your long-term financial goals. The future is sooner than you think. By planning ahead, you can rest assured you’ll be financially secure.
Are you saving up for retirement or building an emergency fund for when times get tough? What are some of your goals, and how much do those endeavors cost? You can search for various online calculators to gain better insight into the amount of savings you’ll need to reach your goals within a specific time frame.
Consider other financial milestones you may want to plan for, such as going on a trip, buying a house, getting married, or having kids. Even if you’re unsure of your particular future, preparing for these events will help you prioritize your finances correctly.
Save for Retirement
Perhaps the most critical budgetary planning you can undertake is saving for retirement. While retirement may seem a long way off when you’re in your 20s, you’ll be glad you started now.
Begin contributing to a 401(k) or another type of retirement plan as soon as you begin your first job. Some employers will even fully or partially match your contribution, or your account may generate compound interest over time, resulting in even bigger savings later on.
Suppose a 401(k) isn’t offered at your company or you’re a freelancer. In that case, you should consider other types of retirement accounts, such as an Individual Retirement Account (IRA), Roth IRA, Savings Incentive Match for Employees (SIMPLE) IRA, or a Simplified Employee Pension (SEP) IRA.
The general rule of thumb is to contribute about 15% of your salary to your retirement savings account each year. However, if you’re unable to do so at first, work your way up to higher contributions in time.
Find a Balance Between Saving and Having Fun
Most twenty-somethings don’t want to spend their time worrying about finances. You want to go out and have fun, all while being able to pay rent and put food on the table. It’s perfectly fine to treat yourself and have some fun, though, as long as you make the appropriate space in your budget for it.
Financial planning is a lot to wrap your head around, especially in your 20s. Finding the right balance between budgeting for your future and taking advantage of these prime years is essential. Your 20s only come around once, after all.
About the Author
Cora Gold is the Editor-in-Chief of women’s lifestyle magazine Revivalist. She has a passion for living life to the fullest and inspiring others to do the same. Follow Cora on Facebook, Twitter, and Pinterest.
I would like to thank Cora once again for her great money tips for 20-year-olds. I particularly liked the one with the company benefits as it may be overlooked. And actually, all these tips also apply to people in their 30s and above 😀!
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