Knowing how to manage your finances in your 20s can be difficult. From student loans to starting a new job (or switching between jobs), to having limited saving accrued, it can be challenging to know what to do.
Fortunately, if you develop good habits now, you can start establishing a strong financial base that will last the rest of your life. Here are some tips for getting started.
Start Saving
One of the best things you can do is to start saving money. Anything you can is good, but try to make it consistent. Whether it’s a percentage of your paycheck, or a flat amount. Whatever rule you set, stick to it.
Use Credit Cards Wisely
One of the most common ways people in their 20s get in financial trouble is by running up their credit card balance. It might not even happen because of frivolous spending, it might be a function of needing to purchase necessary things for which you don’t have the money. However, when you do choose to use your credit card, be sure you have a plan for paying it off. Whether you pay it off every month, or plan to pay it off over 2-3 months, keep your balance as low as possible.
Take Advantage of your 401k
If your employer offers a 401k, take advantage of it. This is an easy way to save money for retirement and also to reduce your taxable income. While everyone’s situation is different, putting something away on a regular basis will help you in the long run. This is especially true in your 20s. Putting money away in your 20s has a lot more time to earn interest than putting money away later in life. So, be sure to put something away, even if it’s small.
Buy a Used Car
It’s tempting to purchase a brand new car. It’s even more tempting to lease a new car. Leasing a new car instead of buying a new car often means a lower payment and less money down up front. However, leasing OR buying a new car isn’t nearly as good as buying a used car. Used cars, even 1 or 2 years old, are significantly cheaper than new cars. This means you can get a great car at a lower price. Additionally, once you have paid off your auto loan, you will own your car.
By following these tips, you can start accumulating savings, building your credit, and start setting yourself up for a strong financial future.