In high school, you learned that mitochondria are the powerhouse of the cell and read Shakespeare’s plays, but you may not have had anyone to teach you about money. Unfortunately, financial literacy is something that’s missing from many schools’ curriculum. Students often manage their money for the first time in college with little guidance or advice (until now). Continue reading to learn 24 money tips you should know before you turn 24.
1. Create Financial Goals
The first step in creating a healthy financial life is to create financial goals. These goals can be anything from saving a set amount of money for retirement each month to putting aside enough money to take the vacation you have always dreamed about. Having a goal in mind will help you stay motivated and on track to achieve it. Try using the SMART goal strategy and make your goals specific, measurable, attainable, realistic, and time-based.
2. Start a Budget
Regardless of your specific financial goals, you will need to have and utilize a budget. Creating a budget in college is easy enough, but the real difficulty lies in sticking to that budget. You will need to be dedicated to spending only the amount of money indicated in your budget. This will help you hold yourself accountable and develop responsible financial habits for the future.
3. Remember the 50/30/20 rule
Another rule to remember is the 50/30/20 rule. This budget rule states that 50% of your income should go to needs, 30% should go to wants, and 20% should go to your savings. The 50/30/20 rule is a good start for people who are just beginning their finances, as it is simple and straightforward. However, as your financial needs grow and change, you should adjust the percentages to meet your needs.
4. Understand Credit and Why it’s Important
Having a good credit score will benefit you in multiple ways. With good credit, you can be approved for a loan at a more favorable interest rate. This will help you in the long-term if you are thinking about buying a home or a car. If you have poor or limited credit, you may be approved for a loan with a high-interest rate, be required to have a cosigner, or be denied for a loan altogether. You should continually work to increase your credit score to save you time and money in the future.
5. Establish a Good Credit Score in College
It is important to establish a good credit score to prove that you are financially responsible to lenders. Your payment history is one of the most important factors taken into consideration when your credit score is being determined. To grow your score, make your payments on time each month, as your credit score can potentially decrease after just one missed payment. You also need to keep your credit card and loan accounts open for a while after you start those accounts. To learn more about what components make up your credit score and how you can increase it, read Credit Scores 101.
6. Get a Credit Card
A credit card can provide many benefits, especially for students. If you need money to purchase an additional textbook or buy gas for a trip home, a credit card can provide instant relief. It also comes in handy when you’re in between paychecks. Having a credit card and using it responsibly is one of the easiest ways to build your credit, which is one of the most important money moves you can make. Overall, getting a student credit card will help you become more confident in managing your finances.
7. Pay Off Your Credit Statement in Full Each Month
A common credit myth is that you must carry a balance in order to build credit. This is not true, as continuously utilizing a large portion of your credit limit and carrying the balance can actually have a negative impact on your score. No matter how much you charge to your card, try to pay off your balance in full each month. Not only will this show credit lenders that you are responsible and know how to manage your money, but it will also save you the cost of interest or late fees.
8. Automate Everything
Because day-to-day life can be very hectic, it can be easy to forget to pay one of your monthly bills. To avoid late fees and the other repercussions from missed bills, you should automate your monthly expenses, like utilities, loans, credit cards, and rent, whenever possible. Contributions to your online savings account, retirement account, or investment account can also be automated. This allows you to start saving for your future without having to think about it.
9. Don’t Compare Yourself to Others
When you are starting out on your financial journey, it is easy to compare yourself to others. Although you may admire that your friends or influencers may have fancy cars and designer clothing, it’s important that you avoid the pressure to keep up. You don’t know how much those friends actually have in their savings account. It’s not uncommon for people to portray wealth on social media yet live paycheck to paycheck or have a mountain of debt behind the scenes. Although saving for your future doesn’t look glamorous at first, you will thank yourself later for living humbly.
10. Use Student Discounts (if Applicable)
If you are still in college, aim to utilize every student discount you can get. With a college student ID, you can reduce your costs of electronics, food, entertainment, transportation, insurance, subscription services, retail items, and more. It never hurts to ask if a store or restaurant you frequent offers a college discount. There are so many discounts that you can use in college, and you would be surprised at how fast the 10% off or $5 savings will add up.
11. Pay Off Debt and Avoid Accumulating More
Paying off debt can be a daunting task, but it needs to be done in order to achieve financial wellness. If you have multiple debts, paying off the high-interest debt first is usually the best method to choose. If you can, you should always try to pay off more than the minimum payment each month and strive to make additional payments whenever you can. This will allow you to pay less money in interest in the long run.
12. Know Your Student Loan Refinancing Options
Paying off student loans fast is a financial goal held by many college graduates. When you applied for your first student loan, you may have had limited or no experience with credit. If you have private student loans, you may be dealing with a high-interest rate. Assuming that your credit has improved, refinancing can help you obtain a lower interest rate. This is the process of taking out a new loan to pay off the student loan (or loans) you already have at more favorable rates. However, it’s important to note that refinancing could mean losing your eligibility for student loan forgiveness or income-driven repayment plans offered with federal student loans. Make sure that student loan refinancing is the best decision for you.
13. Establish Your Emergency Fund
Because life is unpredictable, you should always plan for a financial emergency to occur. One way to be prepared is to have an emergency fund established. Typically, this should be a savings account that contains three to six months of your income, and it should only be used in certain situations. Unexpected job loss, medical and dental expenses, travel, car expenses, home repair, or loss of a loved one all qualify for a good reason to use your emergency fund.
14. Make Sure You Have Proper Insurance
Along with an emergency fund, it is necessary to have insurance. Accidents happen randomly, and without adequate insurance, you could end up paying thousands of dollars in medical bills or car repairs. Additionally, if you are renting an apartment or house, it is smart to have renter’s insurance. Pet insurance and phone insurance could also come in handy in your day-to-day life. No matter the type of insurance, it is always wise to protect the things that are important to you.
15. Begin Saving for Retirement Early
It is never too early to begin saving for retirement. As we mentioned above, one smart way to save is to automate part of your income to go to a retirement account. If your company offers a 401(k) plan with employer-match benefits, make sure you take full advantage. With these plans, you, as an employee, put money into your retirement account, and your employer will match a percentage of the amount you contribute. You don’t want to miss out on this free money! If you’re not yet employed, ask about retirement benefits while interviewing for a job.
16. Set Fun Savings Goals
Saving money doesn’t have to be a chore; you can set fun savings goals to make the process more enjoyable. For example, you could start with the $5 Challenge, meaning that you put every $5 bill you come across into an envelope for a year. You may be surprised at how quickly this adds up. You could also participate in a no-spend challenge by designating no-spend weekends throughout the year. These and other challenges can be fun and help you boost your savings at the same time!
17. Live Below Your Means
It’s easy to fall into the act of trying to keep up with the lifestyles and spending habits of the people around you. As you make more money, you should avoid lifestyle creep, or the increase in spending as you bring in more money. Once you begin your career, you will likely start to earn more money. However, that doesn’t mean you need to spend more money. Instead, you should increase the amount you are saving and live below your means.
18. Don’t Be Afraid of Investing
Investing involves purchasing assets with the expectation that the assets’ value will increase in the future. You can invest in the stock market, mutual funds, real estate, and more. Although there is the potential to make money while investing, there is also a risk of losing money. Before investing, do your research and consider working with a certified financial planner to help you decide which type of investment portfolio is right for you. Start small, and don’t expect to get rich quick.
19. Talk to Your Partner About Money
If you have a long-term significant other, you will need to talk to your partner about money at some point. Every relationship is different, but being on the same page about your finances will help your relationship significantly. It is important to remember that the length of your relationship should determine the level of finance talk you dive into. When discussing money with your partner, you should have an open mind and remember to always tell the truth.
20. Start a Side Hustle
A side hustle is a job that is added outside of your full-time job. It could be anything from making and selling something you love to monetizing another interest. If you are relying on your current occupation to be your sole source of income, losing your job could hinder some or all of the financial progress you have made. The money that you have saved up will begin to be depleted by all of the expenses you have and there will be no source of income to pay it back. Side hustles add a supplemental income instead of putting all your eggs in one basket.
21. Continue to Improve Your Personal Finance Knowledge
Once you have a good handle on how to manage your money, you should continue to increase your knowledge of personal finance. You can gain more knowledge from reading personal finance books and blogs, listening to podcasts, or following financial literacy pages on social media. Many colleges offer events that help teach students about getting a job, building credit, or other helpful topics for students’ futures. If your college is one of them, take full advantage.
22. Share Your Money Smarts With Others
As you continue to improve your personal finance knowledge, pay it forward by sharing your experience with those who ask for it. Talking to your friends about money can seem unnecessary and boring, but it can actually help both of you become better managers of your money. When you feel comfortable talking about it, you should share your money smarts with others. Remember, you may be able to learn from their experiences too.
23. Be Patient
A lot of people want to have enough money to live comfortably yesterday. The process of developing your finances takes time and is unique to each person. Even though it would be nice to become a millionaire overnight, your investments need time to grow and your savings need time to accrue interest. You need to be patient to allow your money to work for you. Although you may have to make sacrifices now, your smart monetary decisions in your 20s will pay off in later stages of life.
24. Don’t Forget to Live
Managing your money can be time-consuming, but it shouldn’t consume your entire life. Make sure you are taking time to look away from your budget sheet to see and experience life around you. You shouldn’t beat yourself up for missing a savings goal, or for buying something that wasn’t in your budget. As long as you get back on track, it’s okay to treat yourself once in a while.
Although you may not have learned this information in school, it’s not too late to apply it to your life. We could all use some fresh money advice from time to time. Increasing your financial literacy is something that will continue to serve you as you get older. In time, you will be managing your finances with ease and helping others around you grow in their finances, too. Whether you are 24 or 44, it is never too late to increase your knowledge about finance and work towards your financial goals.