7 Important Money Habits to Form in Your Twenties

Everyone might be saying that “30 is the new 20,” but in reality, your twenties are a prime time to start cultivating smart money habits. This is the period in which your career can really begin to grow, so don’t throw away the opportunity to save money and prepare for a financially secure future.

As you transition from being a teenager to a full-fledged adult, here are the top seven money habits you should embrace if you want to build wealth, credit, and stability.

1. Track Every Dime You Spend

If you can’t account for the last $100 you spent, then you aren’t monitoring your money closely enough. Now is the time to learn budgeting skills, and you can’t do that unless you track your spending daily. Whether you use an app that automatically logs your charges or you manually update a spreadsheet once a week, make sure that you know exactly where your money is going. That is the first, and arguably the most important, step to becoming financially responsible.

2. Start Contributing to a Retirement Fund 

When you’re in your twenties, it may seem like retirement is eons away. However, this is the best time to start saving for your future years. As CNN Money says, the best time to start socking away retirement funds is “as soon as you can.” And there will never be an easier time to save. Once you have a mortgage, kids, and tuition to pay, it will only keep getting harder and harder.

The sooner you put funds into a retirement account, the more time those funds have to grow. Aim to put away at least 10 percent of your annual income into a 401(k) or IRA account. You’ll thank yourself later.

3. Figure Out What Food Budget Works for You – And Stick to It

According to the Bureau of Labor Statistics, the typical American household spends over $7,000 on food each year. While you’re still young and relatively unburdened by other expenses, learn to eat on a strict budget. Eat at home often and limit your grocery budget to necessities. The better you become at maximizing your food budget while you’re young, the more money you’ll have for other expenses when you’re older.

4. Build Up Your Emergency Fund Every Month

The median balance of all American savings accounts is only $5,200. For most, that would only cover a few months of living expenses. A good rule of thumb to live by in your twenties is to have at least six months of living expenses saved so that you can feasibly handle any layoffs, moves, or emergencies that come your way.

5. Find a Side Hustle You Can Rely On

In today’s economy, everyone should be able to make money quickly on the side if necessary. Your twenties provide a time in which you can develop additional skills and work on finding a profitable side gig that you enjoy.  Do you love writing? Look into creating content on a freelance website. Do you have an interest in music? Teach guitar lessons on the weekends. You’ll find that a little bit of extra income goes a long way, especially in desperate situations like recessions or layoffs.

6. Try Not to Spend Money You Don’t Have in the Bank

Unless you’re applying for a car or home loan, you probably shouldn’t be spending more money than you have. That’s why credit cards are so dangerous; people see their high spending limit and wind up with a bill that’s higher than their bank account balance. High-interest rates cause you to eventually pay off your balance, plus some extra. Be safe and only spend what you can afford to pay off today.

7. Learn to Ignore Peer Pressure in Regards to Spending

Just because your friend drops $70 at the bar every weekend doesn’t mean that you should. Your twenties can be challenging because everyone is at a different financial point, but the important thing is to find a budget and lifestyle that works for you. Don’t let the spending habits of others pressure you into making poor financial decisions.

As long as you abide by these seven habits, you’ll find that saving and avoiding financial trouble is entirely doable, even on a low salary. Remember that being financially-responsible doesn’t mean that you’re wealthy; it means that you’re smart with the money you do have.

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