Your 20s can be one of the most memorable times of your life, at least it has been for me. You’ve entered the workforce, have little responsibility and finally have an income to call your own. Maybe you even got married and now you have a shared income, or you are starting to plan your own little family. With all the freedom that comes in our 20s, it can also come with some significant financial consequences if you’re not careful.
For most of us though, it’s easier said than done when it comes to saving more and spending less. That’s why getting into good habits while you’re young is so important. Here are a few tips to help you get started.
- Learn how to use a credit card. The right way. This is a hard lesson to learn, but we should heed the warnings of our elders and be careful about how we use our credit cards. Millennials, like myself, tend to use credit cards to buy clothes, entertainment, and gas, while older (and sometimes wiser) generations use it primarily for travel and major repairs. Don’t get me wrong, having a credit card is a great way to build your credit score… as long as you are doing it the right way.
- Don’t inquire until you know for sure. Credit inquiries can negatively impact your score up to five points, which is especially damaging to a young adult who doesn’t have a long credit history. The rule of thumb here is to shop around before buying something that you plan on taking out a loan for. Once you’ve made your final decision then you can have your credit pulled to make the purchase.
- Build your credit. Your credit is the number-one key you have to financial freedom, so build it wisely. There are numerous ways to build good credit including paying your student loans on time, paying your car loan on time, diversifying the types of loans you have (credit cards, installment, mortgage, etc.) If you don’t know where to begin, stop by the credit union for some one-on-one credit counseling with our experts.
- You don’t have to be rich to invest. There’s a big notion that only people with a lot of money should invest in long-term saving. Even though you most likely won’t get rich overnight, it’s never a bad idea to use investments or CDs as a way of saving. Just taking a little bit out of each paycheck and investing it into a High-Interest Savings Account or a Certificate of Deposit will help you in the long run.
- Stop spending so much money socializing. Like most millennials, I too have fallen victim to wasting money on “the short term.” You know, things like going out to eat or going to the movies, which for the time being is great, but as life happens, you’ll come to realize how much you need that savings account for kids, emergencies, or your retirement. I’m not saying that in your 20s you should stay home every night but set some boundaries and make sure you’re saving as much as you’re spending.
“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it ensures the possibility of satisfying a new desire when it arises.” —Aristotle
So, the next time someone from an older generation gives you some financial advice, just take a second and listen to them. They may be telling you from experience.