- In my early and mid-20s, my finances were a train wreck.
- I was constantly overspending and had nothing in my savings account.
- By the time I turned 30, I managed to stick to a budget, pay off all my credit card debt, and put more money in savings than I ever thought I could.
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I write about personal finance for a living, which is ironic for anyone who’s known me for a while. For most of my 20s, checking my bank account felt like watching a car crash in slow motion.
As someone who studied economics, understanding money and maths wasn’t my issue. I knew what to do with my money – I just didn’t do it. My behaviours were deeply rooted in bad habits I’d formed, or good habits I’d failed to form.
Luckily I managed to make some changes in my late 20s. I recently celebrated my 30th birthday, and here are some of the bad money habits I managed to kick before entering a new decade.
1. Avoiding my bank account
I used to go into full panic attack mode checking my bank account, so I stopped doing it. This was a huge problem because I also had a habit of regularly letting my checking account balance drop to almost $US0. More than once, I had my card declined somewhere only to finally look at my balance and realise that I didn’t have any money left.
It wasn’t until my mid-20s, after I almost ran out of money in a foreign country, that I forced myself to start checking my bank accounts regularly. I set my browser to automatically open up to the login page for each of my accounts as a reminder. Now, I check my checking, savings, and credit card accounts on a daily basis.
That might sound like overkill to some, but keeping my financial situation at the front of my mind has been instrumental in helping me achieve my other financial goals.
2. Not tracking my spending or keeping a budget
Budgeting is tedious, and in my 20s, I had no idea where my money was going or how much I was bringing in most of the time. This caused me to habitually spend more than I made.
Now, I’ve found ways to stick to a budget without even thinking about it. I have Mint, which automates my budget for me, and I also use two checking accounts as a budgeting tool.
I have two fee-free checking accounts: one with First Tech Federal Credit Union and another with Charles Schwab. My paychecks get deposited into my credit union checking account, and I have all my bills set to be automatically paid from that account. Then, I transfer a set percentage of whatever is left to my Charles Schwab checking account, and that’s my spending money for the month. The rest goes in savings.
3. Carrying a balance on my credit card
Remember that habit I had of spending more than I made? It had to do with my habit of shopping in my spare time. Every month I would run up a balance on my credit card and then pay off what I could by the end of the month. I racked up $US10,000 in debt and easily spent thousands of dollars on credit card interest in my 20s.
My solution to this problem was two-fold. First, I stopped buying things I didn’t absolutely need, which was helped by the fact that I got tired of seeing all the waste I was producing. I still use credit cards for the points but I check all of my balances daily, so I can see if my credit card balance is creeping up too high.
4. Ignoring my savings account
I didn’t take saving money seriously in my 20s. Retirement felt like a lie, and I had no desire to purchase a home or have children.
Finding my bank account balance with a single digit in some dire situations and quitting my job without enough money saved woke me up to the fact that I needed an emergency savings fund. But I wanted more than that. Envisioning all the things I could do with my future if I had a nest egg, from taking round-the-world trips to starting a business to helping a family member in need, helped me understand the invaluable sense of security, freedom, and possibility that comes with having money saved.
I started building my savings by opening a free high-yield savings account with Ally Bank. I got into the habit of paying myself first – that is, depositing money into my savings account before I pay any bills or do any shopping. The money I earn with my higher interest rate is a nice motivator too. I also started setting concrete savings goals for myself and taking them seriously, and when I’m not meeting them, I find ways to make more money.
My financial situation would be a lot better if I’d learned these lessons earlier but we all make mistakes in our 20s. Changing my money habits when I did has profoundly improved my stress and anxiety, and it’s also helped me look toward the future with a sense of optimism I never used to have.
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