Your twenties are a pivotal time in your life. You’re breaking hearts, taking names, having adventures and, unfortunately, blowing way too much money. You don’t have to become a “responsible” adult overnight, but now is the time to make sure you get to live the life you always wanted.
Follow these 10 steps to start on a lifetime of financial success.
- Say No to Debt
If you aren’t in debt yet, stay that way. According to the debt.org, American’s between 18 and 24 are reducing their debt, and the same goes for those between 25 and 34. Combined debt is averaging about $4,100, but that doesn’t take into account student loan debt.
- Monitor Your Credit
Think about the number of credit card offers you get in the mail every week. Also, think about all the times you’ve moved in your 20s. I’ve already had 3 cross-country moves at age 26. What I didn’t think about was the trail of junk mail I left in my wake.
Pull your credit report at least once a year. If you already have a credit card, many companies are starting to offer a free credit monitoring service that — at least — gives you an updated credit score every month.
- Pay Bills on Time
Missed payments are an easy way to damage your credit and waste a ton of cash. Late payments cause monthly fees and will skyrocket the interest rate. Think 15 percent APY is high? Wait until it clears 20.
Auto-pay can save your credit from delinquent credit cards, cell phones or utility bills. There’s nothing like renting or buying your first home only to discover that the electric company doesn’t trust you and wants a hefty security deposit upfront.
I hate to admit this but I’m terrible at paying bills on time. Auto-pay and the financial tracker app by Mint has saved my credit.
- Save for Retirement
If your employer offers a 401k with matching, make sure you’re in on it — and always put as much in as your employer will match. It’s free money.
The earlier you start investing, the earlier you’ll be able to retire. At 67, you’ll be spry and ready for adventure. Pushing 80 is another story. Set retirement accounts up as another automatic deduction and you’ll never notice the difference in your paycheck.
- Learn to Budget
You like fun and money, right? If you don’t have a budget, you have no idea how much cash you’re wasting every month. A budget doesn’t strip you of fun, it creates a plan so you can have fun longer.
Check out Reddit’s personal finance for some fantastic and in-depth templates on how to set up a budget.
- Prioritize Major Purchases
Personally, it’s impossible for me to save every penny all the time. Just like a super-restrictive diet, when I splurge, it’ll be big. Instead of saving all your cash without allowing room for fun, prioritize major purchases.
If you really want to go to Mexico this summer, but you also need a deposit on a house, don’t do both if you can’t afford both out-of-pocket. Pick the one that matters most.
- Buy a Cookbook
Eating out is one of the biggest ways to waste your cash. If you’re a social person, happy hour might not be something you’re willing to give up. That doesn’t mean you can’t avoid buying lunch at work.
Learning to cook is the best way to keep your palate and your purse happy. Plus, you can entertain your friends.
- Don’t Carry Credit Balance
My favorite way to keep myself from using my credit card is to freeze it in a thick block of Tupperware. Think that’s extreme?
If I splurge and buy a new flat screen for $700 at a 17% interest rate and take a year to pay it off, I’ll pay an extra $66.12 for the flat screen.
Make sure you can swallow how much extra you’ll be paying before you use credit for purchases.
- Establish an Emergency Fund
Yes, you should save for retirement and an emergency fund. Save enough to cover at least three months of expenses. They say when it rains, it pours — especially when it comes to finances.
- Don’t Max Out College Loans
Student loan debt continues to rise. We’re taught that a college education will help us get ahead in life; however, if you graduate with an English degree and more than $30,000 in college loans, you’ll start your adult career in financial trouble.
Many of us don’t have a choice when it comes to student loans, but you can choose not to borrow more than you need. Think about what you can cut back on so you won’t end up in a tough spot later. Do you need a new computer when the library is free?