No one likes to talk about money, especially if they don't have any. The last thing I wanted to do after graduating college was worry about money, but I knew I'd have to regardless of if I got a job after graduation or not.
In the "real world," you have to budget your money. Whether you make $20 million a year or $20,000, a budget is necessary to make sure you don't spend more than you make. Because you're in your 20's, you have a lot of room to learn, grow, and make mistakes along the way. It's better to make those financial mistakes now than when you have a family or are trying to buy your own home.
Here are 11 tips I've learned so far, and hopefully these help you along your journey!
1. Creating a budget doesn't have to be boring.
When I was told about creating budgets, I really wasn't trying to hear it. I was still in college, and (while this is probably really bad advice) I didn't see the need to budget my money because I had family that could bail me out if I was in a financial bind. My job only paid me once a month, and I knew it wouldn't be enough (even though I'm sure it was, but I was horrible with me). I had to do my own research on budgeting and budgeting methods in order to learn more about how I should deal with my money.
I tried the pen and paper method--didn't work. I tried using Microsoft Excel--didn't work. I tried tracking my spending on my phone, using the Notes app--didn't work either. I even tried the Mint app (which I use faithfully now), and that didn't work for me. It took a lot of trial and error and research on my part in order to create the "perfect" budget.
When I realized by spending categories and updated them (pretty much every week), I found that budgeting was pretty easy. The reason you don't like your budget now is probably because you know it's too tight of a budget. Trial and error is key. You have plenty of time.
2. Credit cards aren't a bad thing.
I got my first credit card in college. I was a sophomore, and I realized I needed to build my credit. Of course I listened to my family and remembered the sound advice my high school guidance counselor gave me about not opening too many credits cards, but I knew if I wanted some financial freedom in my future, I'd need to build some credit.
Currently, my credit score is in the mid-700s (say what?!). It didn't start that way. When I first opened my credit card with Discover, it was in the low 600s. As I continued to pay my bill on time and in full, I was able to raise my credit score.
So, don't listen to people who say "credit cards are bad," because they're not. Because my credit score has increased, I can now buy a car with a low interest rate, rent my first apartment, and pretty much anything else. Just be sure that you don't open too many credit cards. Make sure you can pay your bill on time, in full every single month. One late payment will make your credit score drop. Also, pay your other bills on time, too. I know times are tough, but it's so easy to have bad credit, and very difficult to get good credit.
3. Know your student loan debt amount.
If you were blessed enough to not have student loan debt, skip this section (and lucky you!). However, the majority of college graduates have a substantial amount of student loan debt (so if someone wants to hack the system and get rid of it forever, that would truly be appreciated). And when you graduate (actually, the day after your last full day of classes), you loans go into the grace period, which lasts 6 months. Within this time, student loan companies believe you'll find a full-time job that will pay you enough money to pay off your loans, go to graduate school or medical school, or join a program that offers loan forgiveness--like the Peace Corp. After your 6 months are up, you need to pay those loans back. The best way to prepare for this is to know how much you owe and to whom.
Don't wait any longer. Contact your school to find out how much you've borrowed and who you owe. Or, check out studentloans.gov for your list of loans through the government and various payment plans.
4. Set up weekly "money dates" with yourself.
I've made a point to do this every Sunday. Because I rarely do things on Sunday's, and it's the start of a new week, I look at my checking, savings, and credit card accounts and compare those to my Mint app. I then look at my budget categories and see where I went over budget, where I'm under my budget, and track my saving progress.
I definitely used to be one of those people that would rarely check their bank accounts because I was scared of the balance I had left. However, being ignorant won't protect you from the truth that long. Do yourself a favor and know how much money you have in your account every day. You don't want to accrue overdraft fees.
5. Pay yourself first.
I'm a strong "treat yoself" advocate. Believe me, I am. However, ever since I started this job, I starting paying myself first. This is not only to have a cushion in case something comes up, but I'm saving for the downpayment of a car. I'm not in a real rush to get a car (even though my goal is to get it before winter), so now I have some money in case I need to help a family member out or an emergency comes along.
It feels so good to have a nice looking savings account. I opened up mine through my bank, where the minimum is $300 before they waive the $4 monthly fee. I'm also looking at other banks so I can spread my money out and keep it where I won't touch it.
Every paycheck, put aside a percentage of your check into your savings. You can even set up automatic transfers so you forget about it and keep it moving.
6. Keep your savings goal specific.
Speaking of savings accounts, it's always good to keep your savings goals specific. For example, if I want to put at least $100 in my savings account each paycheck, that's a lot more specific than saying "I want to save money every month." Because my savings goal is specific, I can now make sure I put at least $100 in my savings account each paycheck. And, because I said "at least," I have a minimum of $100 and my maximum is whatever I choose it to be.
7. When budgeting, create a miscellaneous category.
Birthday presents, holiday gifts, and car maintenance always tends to sneak up on us. If you set aside a specific amount of money per month, you won't have to worry about paying for those surprise expenses.
8. 20-somethings have a modified 50-30-20 rule.
It's a rule of thumb to divide each paycheck: 50% to expenses, 30% to savings and debt, and 20% to wants/personal. However, I recently came across a modified rule: 50% toward expenses, 20% toward savings and debt (10% savings, 10% debt if you want), 20% wants, and 10% generosity.
I believe generosity can mean many things. You can use a portion of the generosity for gifts, if you see a homeless person on the street, or for church. If you go to church weekly, it can be helpful to add that expense in your budget--even if you give a small amount per week.
9. Self control is key.
I'm working on my self control when it comes to spending. I'm working on taking only a certain amount of money with me when I go out, or even taking just cash when I go out. I find it harder to spend cash than using my debit or credit cards because I have to physically give someone money. It's easy to just swipe a card and forget about it.
When you know what you want versus what you need, it becomes easier to gain self control over your spending. Do you really need to buy lunch at work, or can you heat up some noodles and then eat dinner at home? Do you really need that purse or can you wait until your next month's budget? Do you really need those shoes or just want them because they're your favorite color?
If you really want that item, that cup of coffee, or that slice of pizza the next day, see if it fits in your budget. If not, it'll be there next month or next week.
10. SAVE YOUR COINS.
If you use cash, and get change back, put the change in a jar or piggy bank when you get home. I've been doing this for years, and every time I cash my coins in, I'm always surprised by how much I've saved over time. Recently, I've started saving my dollar bills as well. So, after I cash in my coins, I have a ton of dollar bills as well! You'd be surprised by how easily change adds up.
11. Give yourself a grace period.
Just like your loans allow a grace period, allow yourself one as well. It can take a couple of months to stick to a budget--especially if you've never seriously planned one out before. Give yourself time to adjust to allocating where your money goes and paying yourself first and saving your change. What matters is that you have this knowledge and are trying to use it, not that you get it "right" on the first or second try.
Getting it together isn't easy when you're in your 20s. You have people around who make a lot more or a lot less than you do, and it can be a frustrating time. Financial literacy takes time and patience, but what's great about it is that you don't have to go through it alone. Ask your friends or family to hold you accountable. If you still can't do it, give them a portion of your paycheck and tell them to hide it from you until further notice.
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