I am in my late 20’s and debt-free. I paid off all of my debts one month after turning 27. (To learn more about my journey to becoming debt-free, read my post about it here).
To get to this point, I adopted several money habits post-college. Here are my better money habits for young professionals, with some advice geared specifically toward helping young professional women:
- Invest in Retirement as Early as Possible and as Much as Possible
- Create a Budget and Stick to It
- Pay Yourself First
- Use Separate Bank Accounts
- Negotiate Salary
- Stop Picking Up the Tab
- Make Tax-Advantaged Investments
- Set Money Goals, Track Progress, and Celebrate Wins
- Think Hard Before Accepting Loans
- Don’t Be so Hard on Yourself
- Plan for Life Transitions
- Change How You View Money
Some pieces of this list I followed early in my career while others I adopted more recently or am still working on implementing. Hey, I’m not perfect!
It can be challenging as a young woman balancing all the demands of life, especially ones that impact the bottom line. Ladies, we are in this together!
We are strong independent women and we don’t need no man on this journey to financial independence!
1. Invest in Retirement as Early as Possible and as Much as Possible
If your job offers a retirement plan and a retirement match, take advantage of this and, at a minimum, invest into the retirement account enough to meet this match. At my current employer, a 5% match is offered so the minimum percentage of income I would want to invest would be 5% to be eligible to receive the match from my employer.
If your employer does not offer a retirement plan, look into opening a retirement account for yourself. There are plenty of options online or with cell phone apps, a quick Google Search should guide you in the right direction.
Whether you choose to go with Traditional, Roth, or a mixture of both, invest early and push the limit on how much you invest early on in your career because compound interest is on your side the earlier you get into investing.
If you are a young woman who may choose to take a career break to raise a child, it is best to plan for any future stoppage of work and invest judiciously when it’s available to you.
Let me know in the comments below if you’d like me to discuss further retirement investing and I will create a post diving deeper into this topic!
2. Create a Budget and Stick to It
This tip is something I see the value in yet struggle to follow!
The first step to creating a budget is to track your expenses and income. I would track this over three months and average the three months to get a more rounded picture of what my expenses are.
Include:
- All Necessary Expenses like rent, groceries, and utility bills
- Unexpected Expenses like medical bills or car issues
- Fun Spending like concerts, streaming services, and restaurants
- Personal Care Spending like nail appointments, facials, gym memberships, and those expensive serums.
All money leaving your bank account should be labeled and categorized.
Once you have a general understanding of what money is coming in and leaving your account, set realistic budgets for each categorical item that fits your lifestyle and goals. Don’t forget to include any savings or investing you are doing.
A typical allocation of funds follows the 50/30/20 rule where 50% of your income goes towards needs or necessary expenses. 30% of your income goes towards wants. 20% of your income goes towards savings, which some folks say can include retirement and nonretirement savings. I include a percentage of income toward giving or gifting.
This is just a starting point, you have the flexibility to adjust numbers as you see fit. It all depends on your financial goals.
You can use budgeting apps, create a spreadsheet, or use good ol’ pen and paper like my parents do. I have a spreadsheet that I created toward the end of 2023 to track my expenses in Oct – Nov – Dec. I never took that next step to have that inform a budget. Perhaps it is time for me to track my expenses again and create a new budget for myself…one I will actually follow this time.
3. Pay Yourself First
One of my favorite tips that I learned from my dad is to pay yourself first. What this means is to take some percentage or dollar amount of money every paycheck and “pay yourself” by moving that money into a savings account.
Ideally, this money would be transferred out of your checking account ahead of allocating any money to the wants spending categories mentioned in Tip 2.
This year, I incorporated automatic transfers for money I have going to a high-yield savings account, general savings account, and investment account. It is helpful to me to have this money automatically separated out from my checking account so I am not tempted to spend the extra money I see in the account.
If I can’t see it, I can’t spend it!
4. Use Separate Bank Accounts
As mentioned in Tip 3, I have separate checking and savings accounts I use for different purposes. I was inspired to intentionally use these accounts after listening to a Mel Robbins podcast episode where she discussed the 5 rules of money with Tiffany Aliche.1
Like most things I read in books or hear on podcasts, I do not follow the rules exactly as discussed. I do, however, find that utilizing separate bank accounts is a helpful step in growing my savings and building my wealth.
My brain likes to compartmentalize things and this has been game changer for me.
I have:
- A short-term savings account for “fun money” I am planning to spend on upcoming trips or festivals.
- A long-term/emergency savings that is in a high-yield savings account.
- My checking account for necessary or recurring expenses.
- May open another account and separate out my long-term savings from my emergency savings to keep things “clean” and the intent of each account clear.
If you find that you easily switch funds from one account to another because you see the money and overspend, try having a separate account with a different bank for your savings.
5. Negotiate Salary
One of the best ways to earn more money in your job and have a higher opportunity to build wealth is to negotiate your salary. In my current position, I was encouraged to negotiate higher pay upon starting and I am grateful for that recommendation.
In the past, I was too nervous and undervalued myself. I would accept whatever offer was presented to me and not negotiate my salary, pay, or raises. I am curious if this is a woman thing or a personality thing, but my partner at the time would push me to ask for more money whereas I was comfortable with whatever was presented to me.
Do not be like me.
Negotiate your salary and know your worth, especially as a young woman. Do not be nervous to ask for money that is equal to the value you add to the company and be confident in your skills and abilities. You must be your biggest advocate and take the necessary steps to overcome the gender pay gap.
6. Stop Picking Up the Tab
This tip is directed toward those who always want to pay for everyone whenever they go out to the bars or restaurants. You are not a bad person if you don’t pay for everyone. Stop picking up the tab.
I have a tendency to want to pay for everyone or always have it be “my treat,” and the bit of advice I wish I followed earlier in my career is that it is okay to not offer to pay for everyone. It isn’t even expected!
I am torn because I understand how gifting should be a percentage of my spending, but there were times when I would spend hundreds of dollars in a month beyond my means to pick up the tab or cover someone’s meal. This must come to an end.
Learn to tell yourself “no” and work within the budget you lay out for yourself (Step 2). It’s okay to gift money, but you don’t have to pay for everyone every time.
And don’t even get me started on splitting the tab in a relationship…
7. Make Tax-Advantaged Investments
Tax-advantaged investments are “any type of investment, financial account, or savings plan that is either exempt from taxation, tax-deferred, or that offers other types of tax benefits.”2
Think:
- ROTH IRA
- ROTH 401K
- Traditional 401K
- HSA
- FSA
Take advantage of these accounts when they are available to you. Definitions for these terms can be found on Investopedia.
Although it is nice to have this money in your checking account, you won’t regret thinking ahead and planning for the future when a medical emergency comes up and you pull from your HSA or you are retired and have significant funds in your 401K.
8. Set Money Goals, Track Progress, and Celebrate Wins
Shortly after moving to Alaska, I set my financial goals for the year. I determine recurring savings and investment payments to meet these goals then set up automatic transfers (Tip 4). When I had debt, I would incorporate debt payment goals into this list.
Midway through the year, say July, is a good time to re-evaluate the goals and adjust any recurring payments. Incorporate any pay raises, extra income, or shifted money goals.
Whenever I meet or exceed a financial goal, I like to spend money on myself. I bought backpacking gear, snowboarding gear, and fancy hula hoops as small awards for meeting financial goals.
Try gifting yourself whenever you meet a financial goal!
9. Think Hard Before Accepting Loans
After becoming debt-free, I refuse to get into debt again.
(Read about my journey to becoming debt-free here.)
If I could do it over, I wouldn’t have taken on all that student debt and instead chose a cheaper college option. I would have bought a car I could afford in cash, and definitely not take a loan out on a new car. I would not have used credit cards as much as I did while in college and during those earlier working years.
But I cannot change the past.
All I can do is use that information to inform my future and help enlighten others who may be considering going into debt.
Short answer: DON’T DO IT.
Long answer: Strongly consider your options before taking on the debt.
I am not naive to think that going to college or purchasing a car can be done completely in cash for more people, but there is a way to be smart about it, get creative in your earning potential, and limit debt if you feel you have to go into debt. This could be a whole other blog topic in itself, so I’ll leave it here and say just be mindful of your choices and avoid debt, where possible.
10. Don’t Be so Hard on Yourself
Especially if you have debt.
Setting money goals, having a financial plan, getting out of debt, saving money, planning for retirement, planning for having children, and all of the other fun things are important, yes, but so is having a life today and enjoying the now.
Find a balance between saving for the future and enjoying life in the present.
Take a breath. You are doing the best you can, and I am proud of you for it. We are only ever at each age once, it is okay to make mistakes or have your priorities shift.
If you are in debt and wondering how this is even possible, check out my post on how I paid off nearly $100,000 of debt in around 5 years, all while living a fun life.
11. Plan for Life Transitions
Life can throw a lot of unexpected, or even expected but untimely, events at us. Most of these events come with a financial impact. An emergency fund can cover some unexpected costs while planning for upcoming life events is the better route for other expenses.
Intent of Emergency Savings Fund
- Job Loss
- Medical Expenses
- Home Repairs
- Car Issues
Plan a Savings Fund
- Planned career breaks
- Expected maternity costs
- Purchasing a new car
- Purchasing a house
- Moving to a new city
These large ticket items will seem less impactful when there is a fund in place to cover them. This is especially true when enough time is available to plan for the larger transitions in life.
12. Change How You View Money
The way I viewed money and felt about money significantly changed when I started to think about the “why” behind each dollar.
What does each dollar represent?
What is each dollar contributing to?
A tangible item is helpful to quantify what it is you are saving money for or spending money on. Maybe even take it one step further and focus on the feeling you will have when you reach a certain financial milestone.
Tying your emotions to you finances, in a good way 😉
I spend more frivolously when I do not think about money this way. Being intentional with your funds is important to staying on track with your goals (Tip 8) and sticking to your budget (Tip 1).
Conclusion
Thank you for reading my 12 better money habit tips for young professionals.
I believe in you and your ability to commit to at least one of these habits and take control of your finances. There are long-term benefits you may not notice after a week or a year, but your future self will thank you for taking the first step, today.
- Invest in Retirement as Early as Possible and as Much as Possible
- Create a Budget and Stick to It
- Pay Yourself First
- Use Separate Bank Accounts
- Negotiate Salary
- Stop Picking Up the Tab
- Make Tax-Advantaged Investments
- Set Money Goals, Track Progress, and Celebrate Wins
- Think Hard Before Accepting Loans
- Don’t Be so Hard on Yourself
- Plan for Life Transitions
- Change How You View Money
- Robbins, M. (Host). (2024, March 6). 5 Rules of Money: How to Make It, Save It, & Be Smarter About It [Audio Podcast]. In Mel Robbins Podcast. Retrieved from https://www.melrobbins.com/podcasts/episode-153. ↩︎
- Chen, J. (2023, November 23 Day). Tax-Advantaged: Definition, Account Types, and Benefits. Investopedia. https://www.investopedia.com/terms/t/tax-advantaged.asp. ↩︎
