Take charge of your spending and saving to begin building your wealth in your twenties. Learn what habits you need to nurture to become financially stable.
What you do repeatedly is what you become. In that, you create a habit. And if you are not proud of your habits, then you need to change them. But ditching bad habits and developing good ones, especially when it comes to money, is extremely difficult.
To take control of your finances and prosper financially in your 30s, you must build good money habits. Here are seven habits you should start mastering before you hit 30:
1. Develop a Budget and Stick to It
Data from recent research found that 20% of US residents haven’t set a monthly budget. 23% admitted that they hold a savings account. With no budget, you can really track your spending or control money that comes into your bank account. A budget helps you decide where to spend your earnings rather than showing you what you have already spent on. That way, you can know how much is going to covering mandatory expenses and how much you have left for saving and spending on other things.
If you’re not sure how to make a budget or where to start, download a free mobile app to help you budget and track your expenses. Once you have made a realistic budget, discipline yourself to not stray from it. Stick to a budget, and you will see yourself saving more money than you are right now.
2. Write Down Your Financial Goals and Commit to Them
Only 30% of Americans have long-term money goals. If you want to know how to build wealth in your 30s, you’ve got to start with thinking about your money goals and writing them down- both long-term and short-term ones. When you don’t make financial plans for the future, creating savings goals and realizing them can be difficult.
In the beginning, try sticking to shorter-term goals like forgoing buying things you don’t really need. If you are planning to buy a car, for example, you can make a plan to save for a few months towards the down-payment so that the car loan you take isn’t too much.
3. Live Below Your Income
According to USA Today, the average American household spends over 90% of their paycheck. Aside from paying for food and essential utilities, a significant chunk of the money also goes to alcohol, personal care services, and products, entertainment, and miscellaneous expenses.
“The average US household earns about $75,000 before taxes. Very little, if any is left for to save. Lay down some money rules to control your spending and save at least 10% of what you earn. Gradually reduce the amount of money you use until you start saving 20-40% of your money,” says Daniel McKee, an Accounting and Finance Specialist at Skillroads.
4. Create an Emergency Fund Separate from Your Savings
Whether it is an unexpected visit to the doctor or a new tire for your car, emergencies have a way of springing up to each of us. Nonetheless, a large number of employed people are still not prepared for these eventualities. Bankrate’s latest Financial Security Index Survey found that only 39 percent of the people polled will manage a $1,000 setback by relying on their current savings.
While saving can be quite challenging, especially if you just started your career, it is mandatory that you set up an emergency fund. Without having one, you will be forced to use credit cards whenever a water heater breaks, a medical emergency occurs, or when your car suddenly needs a repair.
To get started, set automatic deposits from your checking to your “rainy day” account. Note that saving $25 each fortnight can see you save $650 in a year. Another thing you can do increase your emergency funds is to allocate a portion of any bonuses you get over the year into the savings. Also, if you forego brunch, consider putting the amount into your emergency money too.
5. Contribute to Your Retirement Savings
The average US citizen cannot save enough to retire comfortably. Understandably, saving for retirement is not a priority over repaying student loans as a young person. Regardless, the sooner you embark on saving for your retirement, the quicker you can grow your savings using compound interest to your advantage.
By leveraging the power of compound interest, you can quickly achieve your savings goals. For instance, if you contribute $100 each month to a retirement account at eight percent interest in a year, you will have an excess of $135,000 in 30 years. On the other hand, if you delay your savings by 10 years, then you will have a figure that is barely past $55,000.
6. Do Your Best to Pay Off Student Loans
According to Student Loan Hero, 69 percent of students from the 2018 class took loans, graduating with an average student loan debt of $29, 800. As with many other things, the earlier you address it, the better. You do not need to take any finance lessons to manage your loans. Start right away by drafting a long-term debt repayment plan. After that, try to contribute a portion of any income you get towards repaying your student loan. Do this as often as possible to avoid the compounding effect of these loans.
7. Good Financial Habits: Don’t Be Late on Your Bills
Paying bills on time seems to be the money habit that many people have trouble with. It is typical of people to be overdue on their payments from time to time. As a young person, it is vital to develop a habit of paying your bills on time to avoid accruing avoidable fines and interests on the principal amount.
To conclude, you are now up-to-speed with the useful financial habits every one wishes they’d known before hitting 30. Go out of your way to make them a part of your life, and you will have a peaceful, debt-free retirement.
About the author:
Alice Berg is a blogger and career advisor, who helps people to find their own way in life, gives career advice and guidance, helps young people to prepare for their careers. Find Alice on Twitter @AliceBerg234
This article is written exclusively for CrystalWind.ca. © 2019 crystalwind.ca. All rights reserved. Do Not Copy.
