Becoming good with money is more than just making a lot of it. While that certainly helps, knowing how to handle your money wisely makes all the difference between having enough to retire comfortably and relying on the government for financial support in your golden years.
Even if you’re not interested in becoming rich, mastering a few smart financial habits will help keep you out of debt while allowing you to save more and invest for your future.
Typically, your 20s are the decade to make mistakes like charging too much on your credit cards, taking out a car loan even though you may not have the best job yet and living paycheck to paycheck.
Unfortunately, if you don’t learn how to be money smart in your 20s, you will probably still struggle with managing your money in your 30s and 40s. These are the decades when you are supposed to be building wealth for retirement, but if you don’t manage your money right, that may not happen.
If you’re wondering how to become smart with your cash now, here are five of the top financial habits that you should master during your 30s — no matter your income level.
If you haven’t already, start saving now — no matter how little it is.
One of the biggest financial mistakes you can make is spending all of your hard-earned cash during your 30s without setting anything aside for retirement.
While many people are still in the process of paying off student debt during this decade, that shouldn’t stop you from saving enough for your golden years — especially if you already have a 401k or some sort of pension plan through your employer.
Even if your money is tight and you can only put away $20 into a retirement plan every month, that is better than not saving anything at all.
If you don’t have a 401k, open an IRA through a discount broker. Look for one that has low or no minimum account requirements and fees to make it easier on your budget.
Be more frugal with discretionary spending.
Discretionary spending can cause serious harm to your finances if you aren’t careful.
When you have the habit of buying things on impulse, it can be easy for your spending to quickly get out of control.
For example, say you go out to eat with friends a few times a week. At a minimum of $20 per meal, it is easy to spend several hundred dollars on food every month — just by eating out. If you then go and drop another $150 at the grocery store every week for things that could be eaten at home during the same time period, you are easily spending upwards of $1,000 every month on food — and that’s for one person.
If this is your pattern throughout your 30-something years, it is easy to see how quickly you rack up a large amount of debt — just on eating out and going grocery shopping.
The best way to avoid overspending in your 30s without changing your lifestyle too drastically is to curb discretionary spending.
Make it a point not to spend more in your 30s than you did during your 20s on eating out and going to the movies, shopping at expensive boutiques or any other money-wasting activity.
You may not like the tighter constraints on your spending, but you’ll certainly appreciate it in the long run if you stop living paycheck to paycheck while waiting for that big promotion or pay raise.
Don’t make financial decisions based on emotion.
It is important to always make responsible decisions when it comes to your finances, but too often people make mistakes because of their emotions.
Instead of carefully thinking about your financial decisions, you may impulsively buy that new car because it looks nice, or sign up for a credit card during a store’s special promotion.
You need to learn to be more disciplined when it comes to working with money in your 30s.
If something doesn’t make sense financially, don’t force it to work. If your gut is screaming that you need to run the other way when you get that credit card offer, pay attention and don’t sign up.
Don’t shop if you are feeling emotional or upset because it can cloud your judgment and lead to impulsive purchases that will not be good for your wallet in the long run.
Build up your emergency fund and pay off your debt.
Having an emergency fund is one of the most important financial habits you can develop during your 30s because it will provide you with an important sense of security.
When something goes wrong — even if it’s just a fender bender or dealing with car repairs — not having enough cash to cover sudden expenses will be frustrating and make things worse.
Build up an emergency fund by putting aside some money every month in a savings account that you don’t touch, and try to have three to six months’ worth of expenses saved.
Once this is accomplished, you can shift your focus toward aggressively paying down any outstanding debt that you may have.
If there were any point in life where it would be acceptable to be more carefree with your money and spend with little worry, it would be your 20s.
But once you hit your 30s, it is time to put the financial foolishness of your 20s behind you and begin practicing the money habits that will help you take control of your budget.
Once you have mastered these top financial habits, it is easy to keep them going throughout your 40s and 50s.
By taking control of your finances as early as possible in your life and practicing responsible financial habits every single day, not only will you sleep better at night knowing that you are on the right track with your money, but you put yourself on the path to financial freedom in no time.