If you were to start 1 money habit to improve your personal finance situation, what would it be?
How about if you thought of 10 important financial habits to start today?
Being a young adult nowadays seems complicated. There’s a lot of talk about saving money, earning extra, investing, but for someone with little financial background it can all be pretty overwhelming.
However, there are many millennials who are actually doing great at handling finances. This goes to show anyone can become financially independent.
You won’t become financially responsible overnight though. It takes time and chances are you’re going to have to start small. So here are 10 important money habits you could start today.
1. Start making a budget
Some consider budgeting fun, others would rather jump out a window than look at another budget again.
However, without a clear budget, you’ll never know exactly how much you earn, where your money goes and how much you can actually afford to spend!
Fun or not, putting your finances in order is necessary.
Start budgeting as soon as you get your first job and keep track of your money. Otherwise, it’s impossible to be in control of your finances.
2. Start building credit score
How does paying rent for the rest of your life sound? Or being denied a credit card because of your non-existent credit history?
Mortgage lenders, banks, any institution handling money on a large scale will want to take a peak at your credit score, so it’s important you start building it up as soon as you can.
Don’t get into unnecessary debt though. There are plenty of other ways to start building your credit score and stay out of financial trouble.
3. Start an emergency fund
As Murphy’s laws would have it, bad things could happen at any given moment. Car breaking down, unexpected bills, urgent expenses.
Emergency funds are a must. If you’d ever need to get your hands on some quick money, how do you plan on doing it? Borrowing money from friends is never a good idea and payday loans are just a step away from disaster.
Do yourself a favor and start saving money for emergencies today! As little as $20 a month can add up later on. Don’t think you can’t afford to save enough. Just start small and keep on saving.
4. Start paying off your debt
It goes without saying, if you want to become financially independent, start getting rid of debt!
College tuition, car payments, mortgage, start paying off all your debt as soon as you can.
There are many success stories out there about young adults able to get rid of some serious debt a lot sooner than they have hoped for. With the right strategy in place, you can do that too.
5. Start saving for retirement
Retirement might be far, far away, but the truth is, if you keep postponing saving for the golden years, you’ll risk reaching a certain age with no nest egg!
The sooner you start saving for retirement, the better. Set up a 401(k) plan with your employer or look into other options if you’re self employed. Either way, start now.
6. Start investing
Investing is a very broad umbrella term.
Stocks, bonds, gold and silver, real estate, you name it! There are a ton of investing opportunities out there, you just need to figure out which ones best fit your current financial situation.
If you’re not financially ready to start investing right now, at least put your free time to good use and learn more about it. Of course, do it while you’re saving money for retirement or building your emergency fund!
7. Start paying with cash
If you want to feel like you’re in serious control of your money, start paying with cash everywhere you go.
Paying with your credit card each time you make a purchase could get you in big trouble! It’s easy to forget how much money you have available and overspend.
Start paying with cash and you’ll immediately know how fast money magically disappears from your wallet! It’s a great trick to keep your spending under control and, you know, afford to save more for more important things!
8. Start setting financial goals
Speaking of important things, have you already set financial goals for your future?
How much money would you say you need to retire? What percentage of your salary do you think you should invest on a regular basis to get there?
Setting big financial goals is the first step to achieving them.
Make a plan and visualize the big picture. It will help a great deal to know what you’re saving for and why!
Without a financial goal, saving money is no fun and it can easily turn into a burden.
9. Start ignoring the Joneses
Keeping up with the Joneses, what a waste of money!
Seriously, do you really need to splurge on unnecessary stuff just to show your neighbors you have money too?
It’s tempting, especially for young adults, but irresponsible spending habits only lead to trouble.
If you really need to make your neighbors jealous, why not brag about your realistic retirement plans? Make the Joneses feel they should keep up with you!
10. Start a small business to earn more money
Starting a side hustle is a great way to earn more money. And if things start working well, why not make it a full time source of income?
Young adults have the opportunity to start fresh. There are courses available for people willing to learn a new skill, tax benefits for those in their 20’s.
Of course, anyone can start a small business at any age, but being young does come with certain perks if you’re willing to give it a try as soon as possible.
Being a young adult comes indeed with more financial responsibilities than it used to 30 years ago. But don’t let that discourage you from becoming financially independent as soon as you start working!
What other good financial habits can you think of, that you can start today?