Whether you are just entering college or already deep in student loans, your 20s can be an important time to manage your money. According to Daily Finance, personal finances tend to overwhelm a lot of people in their 20s, so you're certainly not the only person who has felt this way in this age bracket.
However, there are some vital and necessary ways to make sure you don't enter your 30s with too much debt. Here are five financial management tips for 20-somethings:
1. Have a rainy day fund
Even in your 20s, life can hit you with some unexpected financial problems, such as needing major car work done or having a pet need to go to the emergency room. There's a plethora of incidents that can seem impossible to recover from when the problem strikes.
To battle these issues, it's always smart to have an emergency fund in case something happens. It's completely understandable to have a small amount of funds in your checking account, but if an emergency hits, you might not be able to cover the problem. Instead, a rainy day fund could take care of you in a pinch, Kiplinger reported.
Having a back-up fund doesn't take a lot of money and $10 to $20 a month could add up significantly over time. According to Daily Finance, you should aim for at least $1,000 so you can worry less about going further into debt.
2. Get rid of any debts right away
Your 20s should be one of your least financially obligated decades in life. This time period should be spent getting rid of all of your immediate debts such as credit cards. According to Forbes, a lot of younger people tend to hold off repaying credit card debt until they're older and making more money, but usually this doesn't work because expenses increase with the additional income.
Try to eliminate extra debt that could prevent you from obtaining a house, buying a new car or making other significant purchases later in life. According to the source, you shouldn't try to make huge repayments that will make you go broke, but choose a proper budget plan that will quickly and efficiently reduce your debt.
3. Find affordable housing
For your 20s, and especially the earlier years, it might be beneficial to find roommates to help you pay for housing. According to Penny Hoarder, renting a one-bedroom apartment can cost approximately $1,000 in most major cities, and that's nearly half your monthly pay if you make $40,000 to $50,000 annually. On the other hand, having roommates could help you spend about half that for a little less privacy.
4. Consider living at home
If possible, try to save a nice fund for housing while living at home. While parents for roommates might not be the most enthralling prospect, saving more than $500 a month could change your mind. Having a roof over your head for free (depending on how nice your folks are) can be a great way to become financially stable and independent for the future, U.S. News and World Report stated.
It's much better to spend time at home and save money than run out and come back in your 30s.
5. Monitor bills and checking account balances online
Internet banking can do wonders for 20-somethings always on the go. If you need to monitor your checking account, mobile alerts will keep you up-to-date on your funds. If you let things go, you're likely to be late on bills, which will only hurt your credit score.
To stay on top, make sure your funds are with you all the time whether you're on your smartphone or tablet device.
For more information about smart ways to manage your finances, contact Landmark Bank.
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