As I approached my early 20s, something that was important to me was being smart with my money and accumulating a decent amount of money to keep as an emergency fund. Life at this age is fun and exciting, with plans every single weekend and buying new things unexpectedly, but you have to watch out for detrimental spending habits that can hinder you in the future. I managed to get to my financial goals by doing a bit of research and taking some of the actions I am sharing below.
The majority of people have their money in a checking or savings account with their bank, but one of the things that people don’t realize is the impact that their bank account interest has on their money. By keeping your money in a savings account, it is being impacted by the interest rate your money is earning as well as the fee they charge you for keeping your money in that bank.
The interest you earn in your bank account is known as the annual percentage yield, which takes compounding into account. Compounding is the accumulation of interest throughout some period, that is, the interest you earn on top of previously earned interest. This works in your favor when you store your money away since it is generating a bit of extra revenue for you. Something to research is the different types of savings accounts out there. Savings accounts from brick and mortar banks such as Citibank or Chase won’t offer high-interest rates when compared to online banks. Also, keep in mind that when you are ready to transfer money into a savings account from a checking account, there is a limit on the number of transactions you can make, and you can also be charged a fee for the transfer of those two accounts are from separate banks.
One of the questions that I always ask myself when shopping for something is, “Do I really need this?”. I’m not saying be stingy or not treating yourself (I do this way too often), but really think about what you need, what you can trade-off, or what can be delayed. For example, I love clothes, so I know I usually will spend money on that somehow even if I try to control myself, but something I do to minimize the impact of my impulses is cutting down on other things like my daily coffee or getting takeout when I can make myself food at home. Now, if I really want to treat myself to something or go out for a night, I always make sure to do it responsibly. I make sure that my checking account will still have a sufficient amount of money after I make that expense and that I will be able to generate that same amount of money back into my account sometime near the future. A really helpful tip is to look at your own spending habits and see where you are spending money on small things that can add up. Take advantage of student discounts for things like music streaming services, or cancel unnecessary subscriptions.
Building credit is important for any big future expenses such as buying a car but be careful of accruing large amounts of debt that you won’t be able to pay. There’reThere’re many cards out there, so definitely do a bit of reading on what they offer, some of them charge you a fee, but a lot of them are also free. If you are a first-time applicant for a card, some companies may only be willing to offer you a secured credit card which means that you have to put down a security deposit (usually the same amount as your credit limit) since they can’t fully verify your creditworthiness. Credit cards range from a variety of interest rates (APR), and many of them offer promotions where they don’t charge any interest for the first year or so, but a good tip is to just pay your balance in full before the next credit period without rolling over any balance since this is when most people accrue interest on their balance without even noticing.
Savings Plan & Budget
Once you analyze your spending, take some time to think about your income and what you want to do with that money. Consider your income after taxes since this can actually end up taking a chunk of your money out and allocate it accordingly to your expenses and saving goals. There are many apps out there that can help you create a budget. Even apps from your own bank have this feature built-in sometimes. Either way, whether you go the app route or build your own budget in Excel, take some time out of your day to examine your income and expenses and set some goals for yourself. It’sIt’s better to face the hard truth of our spending habits than to go about shopping with a blind eye.