How to Manage Your Finances in Your Twenties
Managing finances can be tough, like really tough. And, let’s be real, no one likes to do it. I confess I’m a HomeGoods addict and don’t even get me started on the damage that can be done if I spy a sale at Jcrew, but I like to think I’m pretty savvy when it comes to managing my finances.
I’m lucky to have a dad who taught me pretty early on the importance of investing, starting a 401k, and balancing a checkbook. I can’t tell you enough how learning a little bit about finance has helped me to put away for my future and I truly think it’s something every twenty-something should learn as early as possible. I’ve certainly got a lot more to learn about the subject, but here are some of my tips for getting your finances in order.
1. Know your monthly income and plan accordingly: One of the smartest things I’ve done for my financial future is get informed. Sure, you may know roughly what you make every month, but have you ever taken the time to sit down and calculate it out? I have a notebook specifically devoted to tracking my finances every month. I’ll put how much we should budget for food, medication, household supplies, rent etc and check on it a few times every few weeks to stay on track. When budgeting, I’ll also make sure to set aside 100-200 dollars for savings every month.
2. Plan for your future: 401k’s are terrifying for so many people, but there is no better way to plan for your retirement. And, the earlier you start the more money you’ll accumulate. So many companies offer these, so if you don’t take advantage you’re literally leaving free money on the table. My advice would be to contribute as much money as you can, or at least as much as your company will match.
3. Talk to a financial advisor: It may seem daunting to talk to a financial advisor, but it’s probably one of the better decisions I’ve made. From investing to setting up a 401k or even filing taxes it’s so helpful to have someone to bounce ideas off of. You can also substitute a financial advisor with a parent, family friend, etc. Some of the best advice I’ve gotten has come from my dad!
4. Avoid store credit cards: When I walk into Jcrew and they tell me I can save 20% off my purchase by opening a store credit card I’m always so tempted. But, they don’t tell you the impact that it has on your credit score. Seriously, having too many credit cards can really drop your score, which could easily make it harder for you to buy a car or house in the future. Store credit cards also normally have huge interest rates, so buyer beware!
5. Pay off your debt: I hear so many of my friends saying they don’t plan on paying off their student debt any time soon and every time I want to cringe. College is so expensive, but letting your loans collect interest just tacks on extra costs that you don’t want to pay down the line. J started paying off his loans by what collects the most interest and it’s been so helpful. Another form of debt that so many twenty-somethings seem to struggle with is credit card debt. I use my credit cards for everything because I love the points, but I try to pretend my limit is the same as what’s on my debit card. My advice – don’t spend more just because you have a high limit, because at the end of the day you’re going to have to pay it off.
How do you keep your finances in order?