8 Ways to Become a Better Saver
When you’re in your 20s, saving may not be top of mind. Traveling, shopping, and going out are a whole lot more fun than worrying about your retirement—especially after a year of not being able to do some of those activities. But setting money aside today can help set you up for a healthy financial future tomorrow.
In this article, we’ll go over 8 ways you can become a better saver while in your 20s, like setting clear goals and getting out of debt. Don’t worry, you won’t have to pass up on fun in to research debt consolidation loan rates. These quick and easy tips will allow you to play hard but still save some cash for later.
How to be a better saver in your 20s
1. Set clear goals
Having clear goals in mind will help you make saving sacrifices. For example, are you putting money aside for a house? To pay off student loans? To take a dream vacation?
Knowing your savings ‘why’ will make it easy to pass up that expensive Starbucks caramel Frappuccino in lieu of cheap instant coffee. If your goals seem overwhelming, try to break them down into weekly or monthly goals. After all, saving $20 a week is a lot less intimidating than thinking about $1,040 a year.
2. Create and follow a budget
Creating and following a budget can help you avoid making unnecessary purchases. To create a budget, first compare your post-tax income against your total monthly expenses. Make sure to include fixed expenses—such as rent—that stay the same each month, and variable expenses—such as entertainment—that can fluctuate. If you find that you’re spending more than you’re earning, see which items you can cut back on. If you’re only going to the gym once a month, do you really need a membership to a luxury fitness center?
3. Review your spending on a regular basis
Take time to review your spending at regular intervals. For example, you could take a close look at your credit card statement to see where you’re spending responsibly and where you can probably be a little more frugal.
4. Stick to the 30% housing rule
So, you finally got that big promotion and want to upgrade from your current 5-roommate living situation. Before you sign the penthouse lease, consider sticking to the 30% rule. This says that your rent should never exceed 30% of your gross monthly income. If you earn $5,000 per month, your rent should stay below $1,500.
5. Wait on the Porsche
By the same token, you should also avoid throwing your money away on a car you can’t afford. That Porsche will seem a whole lot less attractive once you see that it’s taking up 50% of your paycheck. Buying a used car or relying on public transportation can help you save now so you can live out your Fast & Furious dreams later.
6. Find a side hustle
Working a side hustle can help you earn some extra cash that you can set aside for savings. Selling gently used items, driving for Uber or Lyft, and tutoring online are just a few ways you can save for later.
7. Automate your savings
If putting money aside isn’t something that comes naturally to you, you can automate your savings so that a small amount of your paycheck goes straight to your savings account. That way, you’re paying yourself first without having to think twice.
8. Get rid of debt
Last but certainly not least, getting rid of debt can help you save better. Debt and any interest you incur will eat away at any potential savings. Becoming debt-free will help you instead put money toward goals that will help your future, such as an emergency fund or retirement account.
Good luck with your savings journey. Remember that you can and should still have fun in your 20s. Just save the convertible and high-rise apartment for your inevitable mid-life crisis.