Financial Advice for Your 20s: Learn How to Manage Your Money
Life in 20s is an adventure with many firsts: first car, first apartment, first real job, first serious relationship and many more. As exciting as living without many responsibilities may be, there’s no better time than your 20s to start implementing good financial methods and habits that will help you build a financially stable life beyond 20s. This is the time when you explore different jobs and try to find the right career for you and achieve your first financial goals.
Supposed to make such important financial goals and decisions in this period of our lives, it’s easy to get confused and stuck as soon as you start the “real life”. You may have just finished the college, you may have some debts to pay off and your job is maybe not providing you with enough money, making it difficult-to-impossible to come up with ways to save more in your 20s. Be that as if may, you can still get control over your finances and lay a solid foundation for a comfortable life.
Finance Goals For Your 20s
Being a 20-something myself may not sound much like promising guidance, but worry not, because I have made an extensive research and thorough thinking before providing the following tips on how to make money in your 20s. With no further ado, here is how to become financially stable in your 20s without sacrificing anything (big) of your current lifestyle.
Develop a Habit of Saving Money
Now that you’re finally earning money and are able to afford all the things you always wanted, it can be quite difficult to start saving money. Of course, saving money is not ranking high on your priority list right now, although it is a crucial step towards becoming financially stable. One great way to start saving is to open yourself a separate savings account. If you prefer to keep all of your money on one account, you’ll lose track and it’ll be extremely difficult to know how much you save each money. Use this account for savings only. You don’t have to save 50% of your monthly income; 10-20% will do it. Picking up this habit can turn out to be the key of your financial planning in your 20s.
Pay off Your Debts
After graduation, most students still have debts to pay off. Some have a car loan or credit card debts or whatsoever. Debt is a common issue for young adults, but refusing to pay it off can only increase the amount you initially owned in the years to come. So before discussing best investments in your 20s, it’s only fair if we’ve dealt with the money you owe first. Since these debts can be quite big, it is important to create a repayment plan. Decide how much per month will you save for your debt and stick to it. If you think you cannot do it, find a program that will help you by linking your bank account for automatic monthly payments for as small interest fee as 0.25%.
Investing should be a priority to every 20-something. What better time of your life to take all the risks you can than the 20s? You don’t have a family yet and you probably haven’t landed your dream job, so what’s stopping you? Aggressive investing in 20s can have long-term impact on your financial stability, as it can result in big and steady income. The key to successful investing is starting as early as possible, as most investments start paying off years later. For example, if you start contributing to your 401(k) from 20, that fund will continually grow due to compound interest.
Don’t Try to Run Away from Your Financial Responsibilities
Running away from all your financial responsibilities in the 20s can be just as tempting as the urgency to spend money on various things once you start earning. Although it’s hard to resist this sort of temptation, you need to do much more than just checking your bank account every now and then to ensure you’re not near zero or below. Knowing how much money you earn every month and how much you spend is crucial for your financial stability. It is the only way to see if you’re spending more than you’re earning on a monthly basis and prevent it from further happening.
Make Smart Money Decisions
The “easiest” way to be rich when you turn 30 or 40 is to start making smart money decisions in your 20s. As we mentioned, it’s tempting to spend money on the most random of things, but you have to start putting your money at right places. That, of course, doesn’t mean to stop drinking 3 cups of coffee a day, don’t top your gas tank or stop buying the clothes you want. Going out up to 3 times instead of 5, for example, will reduce your monthly spending. Inviting your friends over for a drink, borrowing books from the local library instead of buying (unless you’re a passionate collector) and putting your gym membership on hold during the warm months are some easy ways that can make a big difference for sure.
Invest in Yourself
After graduating many students believe they have all that it takes to conquer the unknown, the big, scary reality adults are talking about, only to soon realize that they need to invest in themselves and upgrade themselves with new skills continuously. Your knowledge, your skills and your experience are the biggest assets you posses, but they have no limit. You need to continually invest in yourself, because the value of your future depends on how smart are you spending your 20s. Take a look at yourself as a financial investment. Increase your value through hard work and a lot of effort and you’ll never be unstable financially (that is, for a long term).
Start Saving Money for Retirement
Call it a boring cliché if you will, but starting a retirement account in your 20s is one of the smartest decisions you can make with your money. You may not know it yet, but time is your biggest ally when it comes to investing. In other words, the earlier you start, the better. Besides from your saving account, open a new account for retirement. Even if you save only $100 a month, with a good percent of return and quarterly compounding, you will have a fortune when you turn 65.
Start an Emergency Fund
I’m not the first to say it, but I like to say it, sh*t happens. Unexpected car repair or expensive medical bill can give you a nightmare, especially if you don’t have the needed money to sort it out immediately. What do you do in that case? Get a new debt. However, if you start an emergency fund and keep adding on it as often and as much as you want and can, that bundle of cash can go a long way in helping you achieve financial stability. Start with a realistic goal of $500. Then, keep increasing it.
Being financially stable in your 20s can feel overwhelming, however, following these 8 tips will surely make it easier for you. Just keep in mind, you don’t have to sacrifice your youth to be rich. Precise financial goals, smart money decisions and the right investments is all that it takes.