6 Financial Lessons to Learn Before You’re 30
It’s important to develop responsible spending habits early. Even though most people in their 20s are already in debt and their bad financial habits can be justified by youth or education (or both), you won’t get any sympathy for these bad habits and decisions when you reach the big 3-0. If you want to create a stable life without the burden of debt, here are some financial lessons you need to learn:
Open – and use! – a savings account
Starting a savings account before thirty can be tough, especially if you’re already carrying debt with little extra income to spare. There are going to be emergencies and having a savings account, no matter how small, will be extremely helpful. It’s important to save your money before you spend it. One easy way to increase your savings is to diverting a small percentage of each paycheck to a savings account. Several online banks offer higher interest rates than traditional banks, giving you the opportunity to increase your savings. You want to make sure you have enough money to afford normal living expenses, but you also need a backup.
First things first: get rid of debt
Clearing your debt should be a priority. Credit cards are one of the easiest ways to put yourself into debt, but they’re not a completely negative presence. Credit cards can help you build credit, but you need to make sure you pay them off on time and don’t max them out. It’s common for people in their 20s to be in debt, but if you assess your situation and understand what you need to accomplish in order to be debt free, you can make a plan to make the debt disappear.
Make a budget, set goals, and stick to them
Planning ahead will help you be more financially prepared in the long run. You should make financial goals for yourself and hold yourself accountable for them. Know exactly where it is you need to spend your money, and then see where you’re spending it. Don’t let others influence your spending – are your friends dragging you out for drinks again? There are plenty of things you can do that are free, fun, and won’t affect your budget.
Be patient with credit-building
It takes time to build credit, but it can be destroyed in an instant. There are several factors that influence your credit including late payments, no payments, or opening a store credit card. Make sure to always pay your credit card bills on time, because missing or late payments could hurt your credit score and increase your debt. It is important to be patient and resist impulse purchases. Store credit cards can also hurt your score because they have higher interest rates than most bank credit cards and generate a “hard inquiry” on your credit report. These types of credit cards put you at a greater risk for debt and are a red flag on your credit report. Say ‘no’ to the sales associate that tries to lure you into a store credit card account, as tempting as that extra 15% savings may be.
Sacrifice now, luxury later
Ask yourself if you can live without some of the things you are spending money on. If you receive a pay raise or have any type of cash windfall, you can use it as an opportunity to save more instead of spend. You should only spend big when you feel the purchase will offer long-term benefits.
Monitor your bank statements
We can digitally access almost anything these days, including bank statements. Whether or not you’re going paperless, it’s crucial to make sure all your money is where it is supposed to be. It makes budgeting easier when you can track your spending and see exactly where your money is going. It’s easy to dismiss your own charges and let them pile up when life gets hectic. Be diligent in checking your statements and make sure you are sticking to your budget.
It takes just twenty-one days to form a new habit, so it won’t take too long for you to implement a successful money management system for yourself if you are proactive and mindful of these financial lessons. You shouldn’t be stressed when you think about money; developing solid financial habits is a good way to start off on the right foot. These financial lessons are a great way to stay on track and guide you toward better financial decisions and long term stability. If you want to know more about easing the burden of debt, contact our office for a free consultation.