Personal finance can be a very scary subject for many young woman. That’s why I believe that developing good financial habits in your early 20s will help you become financially smarter and wiser with how you spend and save your money in those first few years of adulthood.
Here are a few financial habits that I’ve learned along the way that I believe will help every girl in her early 20s navigate her finances and set her future self up for success.
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Transitioning from college into the real world can be really hard. Whether it’s transitioning from being a student to working a 9-5 corporate job, part of being an adult is learning how to manage your own finances. And trust me, I know that can be very tough and overwhelming. As a young woman in my 20s myself and from working in finance and accounting, I am giving you my top 5 financial habits that have helped me over these past 20 months that I’ve been a “full-time” adult.
Whether these financial habits may be common knowledge to you or not, consciously thinking about these things have helped me grow into a financially independent 23 year old.
This post is all about financial habits that every woman in her early 20s must know.
FINANCIAL HABITS YOU MUST KNOW
1. Spend Cautiously
This is where having a budget for your spending will save you!! It is so important to keep track of what you are spending your money on each month. Do you have to pay for rent, utilities, student loans, car loans, etc? It is so important to not overlook the fixed expenses you’ll have each month and account for them in your budget.
When it comes to your personal expenses always think of ways that you can cut back. Think about any subscription services you have, if any. Do you really need all of them or are they just nice to have? How many times do you spend your money on eating out, getting coffee, or getting drinks? I find asking myself these questions super helpful. Being aware of how you spend your money will help you proactively plan on how you can make better spending decisions.
Setting intentions about my spending has also helped me control my personal expenses. Remember to not be too hard on yourself either. I know that sometimes a little retail therapy or for me personally, “Starbucks Therapy”, makes the tough days that life throws at you a little better, but it is important to not let those add up excessively and get the best of you. Once in a while is okay, but everyday becomes a problem.
2. Prioritize Savings
Set up a high-yield savings account and start contributing to that every month. Have a savings goal each month and stick to it!
A high-yield savings account offers a higher interest rate compared to traditional savings account and will allow your savings to grow more quickly over time. You can even set up automatic contributions from your checking to savings account so that you can meet your savings goals each month.
3. Invest in Your Retirement
I actually had a crisis when I was setting up my 401(k). Like I was actually crying to my parents about it. So trust me when I say that I know it can be really scary to start thinking about retirement when you are so young. Changing your mindset to setting up your future self for financial freedom and success will help ease your nerves on this one. It definitely did for me.
Take advantage of your employer-sponsored retirement plan or set up a Roth IRA to start investing in your future. If you have an employer-sponsored retirement plan, many companies will match your contribution up to a certain threshold. Make sure to check your company’s matching policy and contribute at least enough to maximize this benefit. If you’re not taking full advantage of the employer matches, you’re essentially leaving free money on the table.
If you don’t have access to a 401(k), opening a Roth IRA is your best alternative as this will offer you tax-free growth on your investment. Remember that the earlier you start investing in your retirement, the better. Even if you can only contribute a small amount in the beginning, the power of compounding will help your money grown exponentially over time.
4. Understanding Your Credit Score
Understanding and monitoring your credit score time to time is a very important financial habit especially if securing a mortgage, financing a car, or qualifying for a credit card are a part of your future.
Your credit score reflects your creditworthiness and is used to assess your financial responsibility. You want to make sure that you have a good credit score as it will open you up to better financial options in your future such as good interest rates on loans, higher credit limits, and much more.
By understanding your credit score, you can be more proactive early on to take steps to improve it. Some of these steps would include making timely payments and paying off any debt.
5. Continue Educating Yourself
Learning is a process and financial literacy is not something that you learn overnight. There are so many resources from books to podcasts to YouTube videos that delve deeper into personal finance and can help you expand your own knowledge. Learning how your money works is truly so empowering and will help you gain confidence as you navigate your financial journey.
My favorite YouTuber in the finance niche is Nischa. She has tons of really helpful videos that can help you understand how your money works and can help you build your financial knowledge as well.
These are my top 5 financial habits that I picked up in my first few months of “adulthood”. Again, I am only 23 and I am also still learning, but these few habits have definitely helped me stay confident about my financial stability and financial future. I hope you found these tips helpful. Let me know in the comments below!
This post was all about financial habits for every woman in her early 20s.
