Solid Financial Habits to Practice in Your 20s

When you’re in your 20s, middle age seems so far off. However, it’s not. It will arrive very quickly even while feeling like forever. If you make it your mission to learn about finance so that you can manage your money better throughout your life, you’re going to experience a lot more success – even if you don’t earn the highest paycheck around.

• Know How You’ll Earn Money – It’s nice to have a dream, and it’s also fun to imagine that whatever you are passionate about is the best way to earn a living. However, it’s also important to know how you’re going to earn the money you plan to spend in your lifetime. Research different career choices to find out what you really earn when starting out and near retirement by asking individuals who are in those jobs.
• Know What Things Really Cost – It’s imperative to do some research about the things you like and how much they cost. You may be dreaming of that pretty house you saw on the hill, but if you have no idea how much it costs or how much real estate appreciates over time, you may choose the wrong career or make choices based on erroneous ideas.
• Create a Workable Budget – Whatever you do earn now, it’s important that you don’t just spend it without thinking about it. Even if you make minimum wage right now, sitting down and crafting a budget that will work if you follow it, is important so that you will always know where you stand. Look at and work with your budget every single day.
• Avoid Consumer Debt – It’s super-tempting to use credit cards to boost your standard of living. But the truth is, for most people who earn a median or even slightly above median wage, consumer debt will not improve their lives. Instead, it will cost you so much in interest that it will actually harm your life. Only people who can afford to pay credit off immediately or at most within six months should use credit, unless it’s for a serious life and death emergency.
• Don’t Skimp on Insurance – Health insurance, renter’s insurance, long-term care insurance, car insurance, life insurance, and so forth are all very important to start paying for now. It’s going to cost you less if you start early than if you start in your 30s.
• Build an Emergency Fund – The very first thing you should do when you start your job is to work on saving at least six months of living expenses. Having that emergency fund is going to help you avoid using emergency credit and give you options you won’t have if you don’t have cash on hand.
• Start Saving for Retirement Now – The reason average people can save money for retirement is that long-term savings strategies take advantage of compounding interest. If you start today and the market stays like it is, and saved only $1000 a year, you can use that magic to jump-start your retirement savings. Shoot for 10 to 15 percent of your yearly income from your 20s until you retire.
• Know How to Build a Good Credit History – Credit reports are seriously an unfair game that corporations and credit card companies love to play. The way you get a higher credit score is unrealistic for most people. But the more you learn about it, the more you can play their game and come out a winner. The main thing is to pay your bills on time, keep your consumer debt low, and not close out your credit card accounts.
• Set Up a Filing System for Important Documents – One issue that often comes up in your 20s is realizing how many documents you really need. Make sure you have your social security card, driver’s license, birth certificate, bank information and so forth all filed away safely so that you can get them anytime you need them for a legitimate business reason.

Good financial habits start by understanding the facts surrounding basic personal finance. For example, how much does your dream job really pay? How much does it cost to rent an apartment you will enjoy? How much does it cost to buy a house and so forth?

 If you don’t really understand the real cost of things – how much a job needs to pay so you can comfortably afford the life you want to live, it will be hard to succeed. Starting now and continuing to educate yourself and intentionally earn and spend your money will ensure your success.