Positive Financial Habits To Develop In Your 20's

High schools teach adolescents a number of skills, ranging from literature and essay composition to abstract mathematics and music, but unfortunately there is a shortage of classes that focus on 'financial literacy'. As a direct consequence, many young adults graduate high school and enrol in university with bare bones knowledge of how economics work.

They end up committing costly mistakes that could haunt them for the rest of their lives, and worst of all, they never really develop quality money-management aptitudes. It's a terrible thing to be pushing 30 or 40 only to realize that you're swamped by debt and the paychecks aren't even close to covering the full household expenditure, mortgage rates, insurance, so on and so forth. Here's a quick guide that aims to help youngsters avoid squandering their early years and realize how many things they'd have done differently when they're past their prime.

1. Frugality

The necessity of instant gratification is a nasty habit that most teenagers develop, and the greatest problem is that it infringes on their spending patterns. To put it simply, rather than living within the confines of their income means, they take up several lines of credit to avoid the 'unpleasant situation' of cutting down on their expenses. The reckless spending routine is also difficult to break out of, especially if it's deeply imbedded in your behaviour. Learn how to live a more frugal life before your income can actually account for frivolous purchases every once in a while.

2. Debt repayment

In addition to car and student loans, research indicates that the debt of average college students is reaching incredibly high proportions, mainly due to the aforementioned spending habits. The best time to start creating a loan repayment plan is in the early twenties. Apply for a part time job while in college and use the extra to continuously reduce the debt.

3. Savings routine

Spending every single penny left at the end of the month may be enjoyable for the moment, but in the long run it will have a really negative impact on your budgeting strategy. In case you're not burdened by debt and you're earning money via certain sources – a part time job, scholarship, freelancing, etc. – then putting aside a certain percentage every month and depositing that sum in a savings account is the way to go. Pro tip, if the money is transferred directly into your account or a payment service, you have the ability to automatically redirect the sum into a savings account and avoid the temptation of spending it.

4. Investments

Learning how to invest your money properly from an early age is a great way to ensure that you're going to have a lot more down the road. There's really no wrong time to start investing, but the earlier you decide to do it, the more cash you'll be able to accumulate.

5. Marketable competencies

You'll want to develop a career in a field that are going to be in high demand after you graduate, and it's really recommended to discuss your options with a guidance counsellor. If you have the vision to pursue higher education in a lucrative field, and even apply for a Master's Degree and a PHD, your value to potential employers increases exponentially. Nevertheless, don't forget to seek specialization in a domain that you're actually passionate about as well.

6. Credit line

While we've mentioned earlier that you should avoid credit card debt as much as possible, it is in fact pretty important to own one. However, what counts is that the credit balance is actually positive and lucrative towards increasing your credit score, not putting a dent in it. A low credit score is very difficult to repair and comes as a direct result of failing to pay the balance in full on a monthly basis.

An alternative to credit cards, if you prefer not to go in this direction just yet, consists of applying for an auto loan. Cars represent a convenient means of transportation and most jobs require a permit, so you'd be killing two birds with one stone. Again, think frugal! Don't buy a luxury vehicle when your budget doesn't allow you to cover the monthly payments plus your expenses; a second hand vehicle that's in pretty good shape is a great place to start.

7. Life partner choice

Finally, let's talk about your future life partner. No, we're not going to cover the physical attraction and interests you have in common, but rather how to be fiscally responsible in the decision as well. While you won't base your decision on your better half's credit score, it's important to make sure that you're both on the same train of thought when it comes to finances and spending habits. If you plan to get married and join finances, then his or her lifestyle decisions will affect you as well. Therefore, honesty and openness about future plans are crucial factors.