Good habits don't just happen without effort. If you want to get better at managing your finances, whatever “better” looks like for you, you will only achieve your goals by putting in the work.
Thankfully, you don't have to change your entire approach to money to get on top of your finances. If you are in your twenties and want to work towards a wealthier financial future, start by implementing these small money habits into your existing routine.
Tracking your spending might sound boring, but the reality is that you can’t make smart financial choices if you don’t know where your money is going.
So, start tracking your spending today. You don't need anything fancy – just a spreadsheet or your phone’s notes app will do, or a simple app designed for money management. Note down each time you spend money, no matter how small the purchase is. After a month, you will be able to clearly see where you waste money without realising it, so you can cut pointless costs and redirect that cash into your savings or investments.
Here is a guide on tracking your spending if you want to learn more.
A lot of people find that when they get paid, they have already spent their money before they can even save it. If you are in the same boat, the trick is to set up an automatic transfer into an online savings account, so your savings come out before any of your other purchases.
Start by creating a solid financial foundation with an emergency fund, if you don't have one yet, then move on to retirement savings. Get into the mindset of treating saving like a non-negotiable bill, so you will stop seeing whatever you are putting away as part of your spending budget.
Learn more about emergency funds and how they work here.
Ever heard of something called lifestyle inflation? Essentially, it is the gradual creep of more and more expensive purchases that come into your life as you start earning more money.
Yes, it is tempting to upgrade your lifestyle the minute you get a pay rise or land a better job. But if you are firm with yourself and stick to your current living costs (barring the odd treat here and there), you will be able to quickly build wealth when your income grows. So don’t be so quick to rent a bigger flat or buy a new car if you don't need to.
When you are in your twenties, it is easy to think that investing is only for when you are older or richer. Personal finance is not taught in schools, so it is hardly surprising if you have this assumption. But this kind of thinking costs you valuable time.
Even small investments now can grow into serious money thanks to something known as compound interest. If you are unsure about how to invest, there are apps that make it pretty simple or you might prefer to work with a wealth management firm (despite the name, they don't only cater to the wealthy!).
You have probably heard plenty of times that owning a credit card can help you build a good credit score, and this is true. But there are a few rules you will need to follow to avoid their negative effects.
The most important habit is to pay off your full balance on time every month. Make sure you don't spend over your means and end up owing credit card debt that is carried from one month to the next. If that happens, the interest will wipe out any benefits. Just use your card for the regular purchases you would make anyway.
Further reading: Personal Loan vs Credit Card Debt: Which Should You Pay Off First?
Goals feel real – not to mention more exciting and achievable – when you write them down. So, regardless of whether your vision of a wealthy future looks like financial security, retiring early or complete financial freedom, you will find that putting the goal in writing helps you focus.
If your plans seem unachievable right now, break the goal into small, measurable steps. That way, your future self will stay motivated each time you hit a step, rather than giving in because your progress is less defined.
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For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.