Now that 2018 is here, people are setting resolutions and goals for the new year. But if you’re a cash-strapped 20-something, you might not be in the mood to think about the future – you could be facing heavy student loan debt, working in a job that pays less than you’d hoped, and worrying about whether you’ll ever be financially stable, making it harder than ever to try to save money in your 20s.
But keep your chin up – there are actually steps you can take right now to make the most of your money and save for a brighter future.
“The new year is the perfect time to improve your spending habits and start saving to prepare for the kind of future you want,” says Eric Tyson, author of “Personal Finance in Your 20s & 30s For Dummies.”
Tyson recommends these proven tips and tricks to save money in your 20s.
Save on Your Housing Costs
Don’t go it alone. When you’re young, living in a low-cost situation is much easier than it is later in life. Consider living with roommates or family. Sharing a rental not only lowers your per-person costs, but also provides a built-in opportunity for socializing and meeting new people. Another option is living with relatives – just be sure to talk it through with everyone in the household first to set expectations, raise concerns, and establish how much you’ll chip in for household expenses.
Choose a low-cost rental. If you have champagne tastes but a beer budget, you might be living beyond your means. Your best option would be to finish your current lease and move to a less expensive rental. The less you spend each month, the more you can save toward buying your own place. Just remember to factor in all the costs of moving to and living in a new rental.
Negotiate your rent increases. Some landlords up the rent no matter how good the tenant and regardless of the current economy. If your local economy is weak and the rental market is soft, or your living space is deteriorating, negotiate with your landlord. You have more leverage and power than you probably realize. Landlords don’t want to lose good tenants who pay rent on time, and filling vacancies takes time and money. Write a polite note or pay a personal visit to make your case.
Cut your utility bills. Whether you own or rent, try to keep utility costs low. (Even if utilities are included in your rent, landlords factor your energy use into future rent hike decisions.) Adjust your thermostat a few degrees colder in the winter and warmer in the summer than you normally would. If you own, try to beef up your property’s insulation. And if you pay for garbage service, recycle as much as possible.
Keep Insurance Costs Down
Use high deductibles. The deductible is the amount that has to come out of your pocket before your coverage kicks in on any kind of insurance. They’re a big help in lowering your premiums (unless you have a lot of claims, in which case you won’t come out ahead using this method) and helping you save money in your 20s.
Take care of your health. Exercise at least a few times a week, eat well and drink plenty of water. Staying fit will help you save on health care by staving off doctor visits.
Manage Health Care Expenses
Shop around for the best insurance and healthcare. You can choose from many different plan designs with a wide range of costs. Also, remember that medical providers have a profit motive, so they may recommend something that isn’t your best option, including extra testing that you may not need or benefit from. Always get a second opinion for any major surgery.
Kick your addictions. Cigarettes, alcohol, drugs and gambling can cost you financially and emotionally. Be honest with yourself about the damage these habits are causing and quit today.
Cut Your Taxes
Contribute to a retirement plan. Tucking away money in employer-based retirement plans, such as 401(k) or 403(b) accounts, or self-employed retirement plans is a great way to reduce your taxable income. It also helps you build a nest egg so you don’t have to work for the rest of your life.
Use a health savings account. An HSA is another way to reduce your taxable income, while also socking away money for future health care expenses. In fact, HSAs can offer even better tax savings than retirement accounts because in addition to providing upfront tax breaks on contributions and tax-free accumulation of investment earnings, you can also withdraw money from HSAs tax-free as long as the money is used for health care costs. No other retirement accounts offer this triple tax-free benefit.
Increase your deductions. The IRS allows two methods for calculating your total deduction and lets you pick the method that leads to greater deductions and lower taxes. The standard deduction is appropriate for those with relatively simple financial lives. The itemized deduction makes more sense if you earn a high income, own your home, and/or have unusually large expenses from medical bills and charitable donations. Make sure you choose the method that benefits you the most.
Reduce Your Food Costs
Learn to cook. If you don’t already know how to cook, now’s the time to learn. Do the math: Eating three meals a day adds up to over 1,000 meals a year. Cook in large quantities and freeze leftovers for later.
Consider store brands. Name-brand companies spend a lot on advertising, and we’re the ones who pay for it – in higher prices. You can save a bundle by buying the store brand (like Trader Joe’s or Whole Foods 365 Everyday Value), which is usually the same quality product at a lower price.
Buy in bulk. Wholesale superstores like Costco and Sam’s Club help you save by buying most items in larger sizes. This also lets you get away with fewer shopping trips, saving you gas money, too.
Kick the bottled water habit. You’ll save hundreds of dollars a year by installing a water filtration system at home instead.
Brown bag your lunch. Eating out daily really adds up over time. Pack your lunch and save fancy restaurant dinners for special occasions.
Trim Transportation Expenses
Take public transportation or ride a bike. Living in an area with a subway or bus system is highly recommended. You’ll usually be able to buy monthly passes, which drops the cost per ride. Use your bike to get around during the warmer months (you’ll be able to skip the gym membership, too).
Buy your car in cash: Yes, that means choosing a car that you can afford to pay for in cash. A good-quality used car is a much better option than being saddled with a monthly car payment.
Reduce Your Clothing Budget
Don’t chase the trends. You don’t need to buy a ton of new clothes every year. Stick to the classics — they never go out of style.
Buy secondhand. Check out thrift and consignment shops, vintage shops, or online for good bargains.
Minimize accessories. How many shoes, handbags and pieces of jewelry do you really need? Wait until you have a walk-in closet to start collecting in every color. For now, save your money instead.
Relax and Save
Don’t equate spending money with having fun. Find some interests and hobbies that are cheap or free, and invite some friends who are also trying to save money to join you.
Take vacations you can really afford. Take shorter vacations that are close to home and don’t use credit cards to finance your trips. Or take a staycation and check out your local area. For longer-distance travel, going during the off-season and off-peak times and days to get airfare and hotel deals is another way to save money in your 20s.
The bottom line? There are plenty of ways to save money in your 20s, and you can create a better financial picture for yourself sooner and easier than you think. Put these money-saving strategies into play this year, and you’ll be surprised how much it pays off in the long run.