If you're in your 20s, you probably aren't as financially sound as you'd like to be. The future probably seems a little intimidating, and you can't be certain what your life (or your bank account) will look like in a decade, let alone your 40s or 50s.
That's why it's critical that you start planning and building the foundation for financial success now. Here are some ways you can.
1. Pay Off Your Debt
Whether it's credit card debt or student debt, you should do everything in your power to make sure you're mostly debt-free when you enter your thirties.
This might sound like an impossible task at first. Mountainous debt always looks bigger from base camp. But once you start the climb, paying off more than minimum monthly payments and focusing on the big picture of being debt free, you'll make it to the other side with no obstacles in your path.
2. Start Saving for Retirement
It may seem a bit early, but it's really not. In fact, people in their 50s now planning for retirement are quickly finding that they don't have enough to live on and will have to work well into their 70s.
You don't want to make the same mistake. You should start preparing as soon as possible. Now.
By either speaking to your employer and setting up a retirement plan, or creating a separate savings account that you swear to never touch until you're 65, you'll be set to retire comfortably and on time.
3. Live Below Your Means
Many millennials already understand the meaning of living inexpensively. With crippling college debt and lower-paying jobs than generations before them had, they aren't exactly in the position to live lives of luxury.
But even if you could afford to throw caution to the wind and abandon frugality occasionally, you probably shouldn't. That means you should shoot for an apartment that you can easily pay for, buy generic brands, and generally spend less than you plan every month if at all possible.
By cutting costs everywhere, even if it means pretending or fully believing you're poorer than you are, when you reach your 30s you'll have saved more money than you could imagine possible.
4. Start Investing
The vast majority of twenty-somethings have yet to realize the value of investing their money. Sure, many may have savings accounts through their banks that could already be building in a healthy way for their futures, but they're not taking full advantage of their economic potentials.
If you start investing in stocks and bonds before your 30s, you'll gain loads of experience and understanding of how the financial markets work. You don't have to be rich to make money in the stock market. With a little know-how, you can make the right investments that will pay off in tremendous ways in your future.
5. Be a Little Selfish With Your Money
Because the only thing you can truly have control over is your own finances, you'd be wise to play a little closer to the vest when it comes to them. In other words, don't tell everyone you know about the financial moves you make, and focus on improving yourself before you think about helping everyone else.
This is not to say you shouldn't be generous or helpful when the opportunity arises. Everyone likes showing friends and family members how much they care, but if you want to establish your future now, when you're still young, it's important to be a little selfish.
6. Create a Monthly Budget
If you are a regular reader of the Atlas Credit blog, you know we are big fans of budgeting. Learning how to plan for unexpected expenses and save your money will help you get ahead in the long run. You can learn more about your money flow through budgeting, which is one of the best ways to get ahead financially while you're still young.
A budget ensures you do not have more money going out than you have coming in. To create one, you first need to tally up your regular monthly expenses, which may include:
- Rent or mortgage
- Utilities, like gas and electricity, and communications bills, such as internet and cell phone
- Student loans, if you have them
Your monthly income should balance out these expenses and give you some leftovers. That goes toward extras such as entertainment. In addition to saving for retirement, you also want to save some for an emergency fund you can tap into if something unexpected occurs. That way, if your car breaks down or a pipe bursts, you can pay for the repairs instead of charging them, which can put you behind financially.
7. Cut Out Things You Don't Use
Saving money is the key to getting ahead financially. Too many young people spend on things they think they need but don't actually require. For example, if you subscribe to cable, you probably use four or five channels more than anything else. Do you really need to pay an arm and a leg to get those other networks?
You can just as easily sign up for a streaming plan that gives you a limited package of channels or get a streaming service that delivers similar entertainment for a fraction of the monthly price. Other subscriptions or expenses you can cut down include monthly data plans for your phone or magazine subscriptions.
8. Challenge Friends to a No-Spend Challenge
You may have seen people refer to no-spend challenges on social media. You and some friends agree to eliminate purchases of "extras" like clothing, books and entertainment for a predetermined period. You could go for one, two or even six months.
Instead of spending money on these activities, put that money in your savings account. Get together with your friends regularly to do on-the-cheap activities and still have fun, such as cooking at home for each other or playing tennis at a local playground. You can socialize without spending money.
By following these tips, you may not immediately change your finances. But once you get a little older and look back at the decisions you made to prepare yourself for later, you'll thank your younger self for your prudence. For more financial tips like these, read more of the Atlas Credit blog!