Money Habits You Must Develop Till 25

Fresh out of college, new job and with a fat paycheck – the experience can be overwhelming. With this newly acquired financial freedom comes great responsibility. To start with – break old money habits and adopt new. This rise in disposable income can bear fruit if we start managing our finances at an early age. And what better time to start it than our 20s?

Incorporate these habits in your life and say hello to financial stability very early on in life:

Say No to Borrowing

Let’s start by erasing the bad habits first. Act mature and stop relying on your parents and friends. In college, our allowance is tight. Hence we borrow from friends. There is no commitment on paying back, late fee, or interest. It’s a casual arrangement between friends. But don’t let this habit grow out of control. Manage your expenses in your own paycheck. Borrowing is a bad habit and in some cases, it can turn into an addiction. It’s easy money. It’s especially important to control borrowing when you are a compulsive shopper. This applies to piling up expenses on your credit card as well.

Cut your coat according to your cloth, as they say.

Make a Budget and Use Technology to Stick to it

It’s really easy to manage money these days. With online payments, apps, and mobile banking, we can streamline our finances. Set auto payments on rent, telephone, internet, and electricity bills. The forgetful ones can set reminders too. There are many tools available to set budget. Get an overall view on savings, spending on rent, food, travel from it. Adjust it to suit your lifestyle. Use apps to track your spendings. Cut the unnecessary expenses after evaluating your quarterly spending behavior. I recommend MoneyView app for managing expenses. Most important tip – save before you spend. Transfer funds into your saving account the day your paycheck arrives. Save at least 5%-10% every month.

Investment is your New Friend

Don’t merely save. Invest. At this young age, premiums are low. And returns can be high if we play smart. Compounding offers big benefits especially when you invest in your 20s. Make mutual funds, SIPs, and stock market your new friend. Learn more about them. If anyone in your family invests in the stock market, seek their guidance. Plan for buying your own house. Take a good insurance and retirement policy. These small steps would go a long way in fulfilling your long term dreams. Start soon and reap better returns.

Don’t Succumb to Social Pressure and Spend Beyond Means

It’s tough to break the habits we adopted while growing up. Most of the singles live away from their families making it tough to control the carefree spending habits. As singles, we hang out at malls, pubs, and movie theaters. High-cost places where most overspend. It’s is difficult to resist the temptation when we hang out with our friends. But it’s not impossible. Set a limit to the number of outings. Don’t spend because of peer pressure. Everyone has a different lifestyle and different goals. Learn to say ‘no’ when need be. Remember it’s easy to spend money but difficult to pay the bills.

Don’t Lend and Forget

In addition to borrowing and overspending, lending can also ruin your financial health. Lend money responsibly. Ask for the pay-back plan. It’s difficult to say no to friends who helped you earlier. But don’t let the gratitude derail your finances. Lend but don’t forget to ask for your money back.

Have at least One Financial Goal Every Year

Goals are important. They help us to look closely at our finances. Set at least one goal for a year. Big, small or break up a bigger goal into yearly targets. A few examples –

• Small goal – gift diamond ring to mom
• Big goal – save for the down payment of car
• Break-up goal – buy a home by 30 and save 1.5 lakhs every year

Setting goals and achieving them bring a sense of achievement. It doubles the joy of earning money.

The early 20s is the time we set the foundation of our lives – family, house, and kids. Make a firm foundation by imbibing the above habits into your life.

A Company Secretary by profession, Saru found her true calling in writing. She blogs at sarusinghal.com which she religiously updates every Monday for the last five years.