There's a big misconception that you're supposed to be broke in your twenties. And while it's probably better to be 20 and broke than 60, it doesn't mean it's a good idea.
However, we’re lucky enough to live in an age where it’s easy enough to avoid going broke in your 20s. It takes a lot of sacrifice, and hard work, but in the end, it’s worth it.
Here are seven tips to avoid going broke in your twenties.
1. Don’t spend money on what you don’t need
There’s a lot to be said regarding wanting to spend more and more on stuff you don’t need.
It may sound like one of those pieces of advice that’s been stated so much it doesn't need to be said anymore, but it’s an important part of managing your money.
Look through your house. How much stuff do you have that you simply don't need? It's probably a lot.
Maybe it's the latest iPhone, new clothes you never wear or even shoes just lying unworn in your room.
Take a page from minimalists and try imagining your life without some of those things, especially the ones that play a similar role in your life.
And then decide which ones can go and which ones you really need to keep. There’s a chance you might end up clearing out half your room.
2. Work on a budget
The importance of having a budget can never really be overstated. Once you get your money at the end of the month, have a plan for how you are going to spend your money.
Allocate a part of the cash to the essentials - rent, debt and food.
After an adequate amount of cash has been set aside for those things you can’t live without, you should start considering what you will sacrifice.
At the end of the day, there are things you will have to give up - be it in terms of electronics, entertainment or even on your dining out budget.
3. Cut down on your monthly expenditure
Along the same lines, consider cutting down on things you spend too much money on. For instance, try and reduce the amount of money spent eating out.
In a recent survey, it was found that about 48% of an average family’s food budget goes towards eating meals outside at home.
Crunching the numbers, this accounts for well over a thousand dollars every year.
Take a look at all the things you spend money on each month. Mint is a great tool for this. Once you have it all broken down, think about which expenses you could live without, and which you can decrease.
For instance, you might want to keep your gym membership, but maybe you can find a cheaper one in the area. Or your might decide to ditch your cable and split the cost of a Netflix account with a friend.
Get creative and think of ways you can cut back. It might not seem like a huge deal, but after a while, it really adds up.
4. Plan ahead for nights out
Hands down, one of the biggest money drains for twenty-somethings is entertainment and nights out. Going out for drinks, parties and clubs every weekend gets expensive really quickly.
Before you know it, you'll end up paying for all your entertainment with credit cards because you don't have enough money in the bank.
It’s quite understandable, and in fact, advisable, even for you to go out and have some fun every now and then. Sometimes it’s just nice to have a relaxing meal with your significant other.
However, since this is one of the greatest money sinks you will ever encounter, they have to be handled carefully. Before you go out, you should have set aside a fixed amount of cash you wish to use.
This should, of course, be in line with everything else in your budget. If you’re really serious about saving money and not going broke in your 20's, you can take some of your entertainment money and put it towards your savings instead.
5. Learn to do things by yourself
One thing that so many people don’t realize is how much money they can save just by doing things by themselves.
For instance, learning the intricacies of a car can save you thousands of dollars in repairs. To be fair, picking up these skills is a lot harder than picking up a book and suddenly becoming a pro. It will take a lot of practice, but in the end, it’s worth it.
Perhaps a more practical skill for most people is learning to cook. One of the biggest excuses people make for ordering out every night is the food tastes better.
By learning how to flavor your food and some simple cooking techniques, you can make food that's delicious, healthier and a lot cheaper.
Here's another skill you can learn that'll save you hundreds of dollars every year. Learn how to make your own coffee.
Let's be honest, young adults spend a ridiculous amount of money on Starbucks, usually because it tastes so much better than the instant coffee that's easy to make.
But what if you could learn to make coffee that tastes just as good, if not better than what you order from Starbucks every morning?
Learn to make your own coffee, maybe even bake your own muffins and stuff your own chicken and turkey. They may seem like niche skills now, but you may end up enjoying them so much you won’t be able to turn back.
6. Spend your time wisely
They often say that time is money, and with good reason, too.
How you spend your time will likely have a direct effect on how you spend your money.
More time on your hands means more time for entertainment. More time for entertainment suggests more money being drained daily in order to fill the entertainment void.
Start by taking a look at how you spend your time on an average day. For an entire day, track everything you do, and how much time you spend doing it.
You'll more than likely see tons of gaps where you're wasting time that could probably be spent elsewhere doing something productive.
7. Treat yourself.
In the end, what’s the point of all that frugality if you can’t enjoy life a little? Every so often, find some spare time to reward yourself for meeting or even surpassing your expectations.
Once you’ve set aside an adequate amount of money, and there’s at least some left over, since there almost always is, go out and have some fun.
This is all meant to help you feel a sense of purpose towards saving and being careful with your money. Positive reinforcement is the best way to encourage yourself to keep doing something.
However, don’t get addicted to the thrill. The worst thing you can possibly do for yourself is lose track of all the hard work you’ve put in over the months, possibly years.
It’s fine to treat yourself with some fine wine, a great movie or even favorite video game once a month or so. Just not too much.
Don't go broke in your 20's
If you aren't careful, you could easily blow thousands of dollars in your 20's. Even if you're making decent money, the appeal of going out every night and the vices of being a young adult can land you in debt.
Use the tips above to help keep your finances in order and develop great money habits for the future.