See 5 actionable steps you can take in your 20s and 30s to set up your budget for long-term success.
Your 20s and 30s are years of making big life decisions. Should you buy a home? Get married and start a family? Or travel the world?
No matter what lifestyle you choose, or the amount of your monthly income, saving money young can help you build healthy habits around money management. And this will set you up for long-term success.
See why you should, and how to, save money in your 20s and 30s.
Why Save Money in Your 20s and 30s? Benefits of Saving Money Young
The earlier you start saving money, the better - no matter how big or small your paycheck is.
But why? Let’s go through two of the most common benefits of saving money in your 20s and 30s.
Afford the Lifestyle You Dream Of
One of the most attractive benefits of saving money young is that you’ll get to afford the lifestyle you want.
With a proper budget and a rational spending plan, you’ll be able to set aside money for the trip you’ve been thinking about lately. Maybe you’ve set your eyes on a car you don’t have enough money for at the moment? Or perhaps you’d like to start investing and plan to retire at a young age?
Whatever it is you want to save money for, the earlier you start saving, the sooner you’ll get to your dreams.
Less Stress When Dealing with Unplanned Expenses
Life happens. And we all have to deal with unplanned expenses every once in a while. Some examples of unexpected costs include emergency dental appointments, car repair expenses, and so on.
And budgeting your money ensures you always have cash on the side to cover those surprise bills.
How to Budget Properly
1. Set Financial Goals
The very first step to saving money is to set financial goals. Having a financial goal in place makes it clear what you’re striving towards and helps you make more rational financial decisions.
Some possible money goals include:
• Short-term goal: saving for a new smartphone or a trip
• Medium-term goal: covering your debts, saving for a car
• Long-term goal: saving for a downpayment for a house or saving for retirement
2. Understand Your Income
Once you’ve identified your financial goals, it’s important to understand your income, and know how much of your income you should save.
When evaluating income, many people usually refer to their gross annual salary. But it’s essential to understand your net income - your take-home pay - because this is the amount you have available to spend and save.
3. Track Your Expenses
Even if you don’t usually make large purchases, expenses of any size add up quickly. Before you know it, you’ve already overspent your budget and have to desperately wait for the next payday.
If you’ve been in a situation like this at least once in your lifetime, you need to track your monthly expenses. Save your receipts and keep a spending journal to identify where you may be overspending without realizing it.
4. Use the 50/30/20 Budgeting Rule
How much should you save a month? The 50/30/20 method is an excellent starting point for budgeting newbies. It helps you distribute your expenses to get the most out of your money.
Here’s how to apply the 50/30/20 rule to your budget:
• 50% of your net income should go to essential expenses like food, utilities, rent/mortgage, car payments.
• 30% of your net income should go to needed expenses like phone, internet, and streaming plans.
• 20% of your net income should go to savings. For example, to build an emergency fund, retirement savings, savings for a down payment on a house or a car.
5. Limit Your Miscellaneous Spending
Chances are, you’re left with a certain amount of money after you’ve subtracted your expenses from your income. And it’s critical to how you treat the extra money.
Of course, you can spend your extra money on entertainment and have fun, but if you have financial goals, you shouldn’t go crazy with it.
The best way to take full control of your budget is to limit yourself the amount you can spend on entertainment. While it may seem like a simple thing, it will save you so much more money in the long term than you can imagine. An app like Monorail can help you set your fun-money budget and help you create your wishlist so you don't waste money to overspending.
How To Save Your Money For Financial Goals
The most important benefit to saving money in your 20s is the financial freedom it can bring you. Whether you’re saving money for a new item or a downpayment for a house, it’s essential to budget your money properly.
In general, you should save at least 10% of your income in your 20s and 30s. The more, the better. However, if you can’t commit to 10% yet, you can start lower and increase it as your income increases.
And don’t forget, the sooner you start saving money, the sooner you’ll reach that goal you’ve been saving for.
See how you can start saving money and how you can create your financial goals within the Monorail app.
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