Make, Break or Broke: 5 Financial Habits to Build in your 20s

Make, Break, or Broke: The Top Finance Habits to build in your 20s.

In speaking with adults and young adults, I’ve found that the twenties age range is one of the most interesting periods of adulthood. You know how it goes: serious about life but not quite serious, making your own money, decisions, and choices but still not fully cognizant of the fact that you are an adult with bills and responsibilities.

At least that’s how it was for me. It wasn’t until my wife and I were about 24-25 that it completely dawned on us that we were grown-ups now.

In your twenties, the faster you take full responsibility for your past, present and future and act accordingly, the better off you will be in your 20s and beyond. Unfortunately, Most young adults wait long into their adult years before they learn and implement financial strategies that cause success.

Fact is, there are financial habits that will cause you to live a much more prosperous, and happy life now and later. One thing that can be promised: if you learn and implement sound financial practices early, you will make it. If you don’t, well, you will be broke. Here are the top 5 habits to form now while you still have time:

1. Pay Yourself First. In “The Richest Man in Babylon”, a classic personal finance book, the author gives the timeless advice of paying yourself first. As stated in the book “a part of all you earn is yours to keep”. After reading this, you may be thinking, “ALL of what I earn is mine to keep”. Is it really? Technically it belongs to your landlord or mortgage, utility bills, grocery store, clothing store and everyone else imaginable.

Paying yourself first means setting aside money long before you pay all of the obligations mentioned above. This money can be set aside for savings, investing, and future opportunities. How much? The optimum level is 10%. Yet I will admit, if you have never paid yourself first you may have difficulty with this level; I recommend starting small and working yourself up to this level and beyond. The benefits are endless.

2. Give 10%. You may not expect giving money away as a great habit of personal finance. Before you discount me, I’ll assure you that giving at least 10% of your income away to a charitable organization has tremendous benefits. The most important of these benefits is the idea of karma. Giving your money is one of the greatest ways of attracting more money into your life. In addition to this, giving your money creates a mindset of abundance vs. scarcity.

We’ll have to save the details of giving money to another blog post. As with paying yourself first, if you are not used to giving 10%, you may want to start small and work your way up. Consistency is key.

3. Budget. Budgeting has long been the starting point of sound financial practices. I once discounted budgeting, due to the fact that I heard the term so many times. Luckily I didn’t totally discount it. Once I implemented a budgeting system, it made a tremendous difference in my personal finances. Budgeting helps you direct when and where money go on a consistent basis. Without a solid budget you will be left thinking as I did “where did it all go?”

I recommend creating a new budget on a monthly basis and reviewing on a weekly basis. In my budget I include income, expenses, due dates, automatic payment dates, and overall totals. There are several online budgeting systems such as Mint.Com that have several great features. I simply use an excel sheet, which I admit does not have the great features of Mint. It will be up to you to decide what works for you. The key is to remain consistent.

4. Go with Cash. I understand. The idea of using cash may sound pre-historic. Nevertheless, the use of debit cards and other electronic forms of payments has increasingly been linked to overspending. Using these methods of payment takes away the pain of loosing when spending. Having a $100 bill and spending it all at once has a much different feel then swiping away.

5. No Consumer Debt. Consumer debt is one of the greatest cancers in personal finances. The habit of carrying consumer debt is much like a cancer; without treatment it will build and build until eventually you die financially. A great habit to begin as a young adult is to always spend within your means and never beyond them. With this mindset, you are sure to never go into debt, which will save you time and money.

You are on your way to a great financial future. I highly encourage research and further reading into the topics above and other personal finance practices. Most of all, I high encourage you to take action today to begin or improve your financial success. Remember, everything mentioned here is easy to do but as Jim Rohn stated “what’s easy to do is easy not to do”. There will be a level of adjustment in implementing these areas if they are new for you. Don’t stop, keep going until you make it!