So you’ve been thinking about taking some action and balancing out your financial life. Luckily for you, you came just to the right place. Making smart financial choices in your 20s can help set you up for long-term success. That includes creating a plan to pay off student loans, avoiding credit card debt, building an emergency fund and working toward hitting bigger goals, like having enough money for a down payment on a house. Taking control of your finances at a young age, even if you feel cash-strapped in an entry-level job, will make it easier for you to achieve your goals in your 30s and beyond.
Conventional wisdom dictates that to save money, you need to squirrel away as much as possible while drastically reducing your spending, period. While there is some merit to that strategy, the smarter way to grow your wealth is to cultivate careful spending habits that will allow you to maximize your savings without cramping your style. Here are a few smart habits that will help you save millions of dollars.
Eliminate debt
Debt can hold you back from achieving your goals, so you should take immediate steps to get out of debt. Include paying down debt in your monthly budget so you don’t overlook the action. There are different opinions as to the best plan to get rid of debt, for example, paying off loans in order from smallest to largest, or paying debt off in order of highest interest or lowest, but the point is to develop a plan and stick to it.
Create a budget and stick to it
Creating a budget is an important financial step that can help you get your finances in order and track how much money comes in and out of your bank account every month. While it may seem like a lot of work to create a budget, there are numerous online resources and apps that can help you. Plus, once you have one, the majority of the work is done, and you can tweak it as your spending habits or income change.
Save money every month
This is a good habit some people overlook. Your budget should include a line item for every penny you earn, including savings for emergencies, retirement and holidays. There is never a right or wrong thing to save for. The best trick that you can use to save is to automate your savings. When money is automatically deducted from your account each month, you can never make excuses about not having money to put aside.
Systematically save and invest
It is never too early to begin saving for the future, and the longer you save, the longer compounding interest has the power to work for you. Consider investing 10% of every dollar you make, minimizing expenses, diversifying your investments, and sticking with a long-term savings/investment plan. If you are able, maximize your retirement plan to benefit from this pre-tax savings vehicle.