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How to Build Better Money Habits Without Sacrificing Your Soul

Or your Starbucks.

Building good money habits might feel irrelevant when you’ve just graduated from college. After all, you’re still in your early twenties and you have plenty of time to double your salary and start that retirement account your Mom keeps pestering you to open. What’s the rush?

We’re all familiar with the little devil on our shoulders instigating frivolous purchases… buy the Valentino heels. Go on that weekend trip to Coachella. Order GrubHub just one more time. 

Hello, it’s your friendly resident shoulder angel here, telling you to cut the crap and start building good financial habits now. 
Money Habits - woman holding $100

5 Good Money Habits to Develop After College

We’re not suggesting you save every single penny earned to invest into cryptocurrency (unless that’s your thing), but there are some fairly simple money habits you can start to implement no matter how much money you’re making.
Money Habits - woman holding wallet

1. Open a retirement account.

As counterintuitive as it sounds, the first thing you should start saving for after college is your retirement. Yes, you will not be able to touch that money for about 30-40 years, but as a result you’ll have plenty of dough to afford residing at The Villages once you retire. Elderly you says thanks in advance.

The sooner you start investing in your retirement account, the larger the pot of compound-interest-gold you’ll be sitting on. Many employers offer 401ks, which allow you to invest for retirement with pre-tax money. Some companies will even offer to match a portion of your contributions. There is such a thing as free lunch.

If your employer does not sponsor a retirement account option (or if you work for yourself like a baddie), you can open a Roth IRA or Traditional IRA depending on your income threshold. There’s no excuse not to invest for your 70-year old self. Trust us, she’s ready to sit pool-side and not behind a laptop.
Money Habits - investments

2. Start saving something on a regular basis.

When starting any habit, it’s beneficial to start small. Just ask James Clear, author of Atomic Habits. On his blog, he encourages readers to “start with an incredibly small habit” and “increase your habit in very small ways.” This way, you can build a habit that requires little motivation to start doing, but becomes routine over time.

Start exercising your saving muscle by stashing something every month into a high-yield savings account. Even if it’s just $50 a month, this will train your mind that a portion of your income needs to be put away, and something else needs to be sacrificed as a result. The practice of not satisfying every immediate craving (and instead saving that money) will make it a lot easier to save larger sums once your salary allows. So add it to your morning routine and check it off every day.
Money Habits - saving in piggy bank

3. Check your accounts frequently.

A lot of us take the “cover our eyes and pray” approach to our finances. We wake up on Sunday mornings after high-spend weekends absolutely terrified of our bleeding bank accounts. The solution? Ignore it and go to brunch. Mimosas never judge.

Don’t do this. No matter how much money you’ve spent on a weekend bender, it’s important that you assess the damage and have a grip on where your accounts stand.

Make it a weekly habit to check in on all of your accounts – bank accounts, credit cards, investments, even your credit score. This will help you to catch any incorrect charges, remind you to charge your friend for that round of drinks (or three), and alert you to how much you can afford to spend moving forward.
Money Habits - credit score

4. Figure out what’s worth spending your hard-earned money on… and what’s not.

Instagram makes it feel like everything is worth our hard-earned dollars. Social media influencers do a great job of making you crave La Mer skin cream, Restoration Hardware furniture, Range Rovers, exotic vacations to Tahiti… the list goes on and on. But it doesn’t take a condescending finance bro to tell you that all of this is way out of your post-grad budget (unless you’re Mark Zuckerberg. Or Addison Rae).

Take Ramit Sethi’s advice and follow a values-based spending approach to your money. Do you value a membership at a nice gym, but could probably pass on weekly nights out? Do you really love spending money on fancy coffee, but could care less about takeout food?

Get intentional about what brings you joy, and then spend your money on that. Pick a few categories where you value spending money the most, and restrict yourself in the other areas. With this approach, you can still lead a fulfilling life, just without the financial anxiety. Get to Kondo’ing.
Money Habits - woman joyful

5. Start to build your credit score.

Like your retirement account, your credit score takes time to nurture and grow. Unless your parents made you an authorized user on their perfectly-managed credit cards, chances are you will be starting from scratch after college.

Contrary to what Dave Ramsey preaches, you need a credit score –and a good one, at that. High credit ratings are what will afford you low interest rates on mortgages and auto loans down the road. Low interest rates can make a difference of thousands of dollars throughout the duration of the loan.

If you’re not sure where to start, learn more about credit ratings and how to build good credit on Credit Karma, which is a free tool that allows you to check your score and understand how to improve it.
Money Habits - credit cards

Why You Should Start Building Good Money Habits After College

Yeah, okay, you’ve read the list, but you’re still not convinced you need to do all that. After all, your twenties are abundant with opportunities to blow your shiny new paycheck. Post-work drinks, dinners out, food delivery apps that call your name daily (and scream it on a hungover Sunday). Not to mention travel plans, rent, furniture for that new apartment, bills, subscriptions, groceries… where is there space to save money as a new graduate?

Let us start by saying: we get it. Most of us aren’t making the big bucks right out of college, so it’s easy to delay good financial decisions for a time when our salaries feel more substantial. Allocating any portion of our measly post grad paychecks to anything outside of the immediate future feels impossible. We’re all suckers for instant gratification thanks to Amazon and Instagram. Jerks.

Here’s the thing: you’re probably right that you don’t have that much money to save and invest directly out of college. After all, this is your first job and will probably be one of your lowest salaries throughout your career. But good money habits don’t form overnight and certainly do not magically appear once you start earning six figs.
Money Habits - empty wallet

What is Lifestyle Creep?

You know how you tell yourself you’ll start eating healthy tomorrow, but know that’s not true because it never has been? Your financial habits function the same way. If you’re an impulse spender who can’t say no to a single dinner out with friends, it’s going to be really hard to overhaul your life and start saving once you’re making more money. This is how lifestyle creep happens.

It materializes slowly over time… upgrading your Planet Fitness membership to Equinox along with that salary bump. Switching your drugstore foundation for Drunk Elephant after your merit raise at work. Moving into a luxury apartment once you’re making six-figures. Suddenly, you’ve doubled your salary and are still living paycheck to paycheck.

The thing about lifestyle creep is you’re unaware it’s happening if you never formed good money habits in the first place. Setting positive financial habits from the get-go will allow you to prioritize your future self no matter what tax bracket you fall into.
Money Habits - woman holding shopping bags

14 Things You Might Want to Save For in Your 20’s

For most of us, the really expensive aspects of life don’t start to happen until later on. At first, your expenses will probably be limited to food, a roof over your head, and as much fun as possible. But expensive times are lurking around the corner.

By the time we reach our mid-to-late-twenties, some of the higher price-tag expenses start to reach our ether. This includes (but is not limited to):

  • Attending our friends weddings—and engagements, and bachelorettes, and bridal showers
  • Giving wedding gifts
  • Having your own wedding
  • Getting a pet (who needs doggy day care and fancy food for their sensitive tummy)

Money Habits - new pet

  • Upgrading your beat up Facebook marketplace furniture
  • Renting your own apartment because you’re 28 and tired of loud roommates
  • Buying a house because you’re 28 and tired of loud neighbors
  • Having a child (or several)
  • Getting divorced because your marriage unfortunately wasn’t all that it was chalked up to be (hello, starter marriage)
  • Paying for expensive medical visits
  • Buying a car

Money Habits - buying a new car

  • Chipping in for your parents’ medical care
  • Funding that lawyer you really need
  • Paying an accountant to handle your complicated taxes

…and this is not even an exhaustive list.

Let this list inspire you, rather than scare the crap out of you. Do you believe us now that it’s important that you start building good money habits fresh out of school?
Money Habits - pile of $100 bills

Final Thoughts on Good Money Habits

Building good money habits is hard, but you know what else is hard? Waking up every day terrified of your own bank account. Or considering what you can sell in a pinch when you need cash from your negative-balance debit card.

Start to implement good money habits now so that future-you can live a financial-stress free life. And that’s freedom, baby!
Money Habits - woman holding money

More Resources to Develop Better Money Habits

By Jess Lohr

Jess is a Cambridge-based, Syracuse-born twenty-something who loves coffee, dogs and stalking Zillow for her future home. Her favorite ways to kill time include strolling through Boston’s cobblestone streets, socializing over a glass of wine, and reading finance books (if only 22-year-old Jess were like this).

She has spent the past 4+ years working in Consumer Insights, and when she’s not working on her 9-5, you can find her pursuing her most recent side hustle as a dog sitter. Jess is co-founder of Adultescence, a podcast and lifestyle website with the mission of helping post-grads navigate adulthood.

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