Your 20s’ are an incredible time- you are young, full of energy, and excited to enter the big world of independence and adulthood. But your 20s’ are also an important time to start making smart financial decisions that could set you up for success for the rest of your life. Below are some strategic money moves that every 20 something should make.
Budget, budget, budget.
Budgeting is one of, if not, the most important financial skill you will need to have. Budgeting is the process of calculating all the money that you have coming in monthly, all your expenses, and creating an action plan. This comprises of what needs to be spent and what needs to be invested or saved. Also, you can allocate money for emergency, fun, and charity etc… It is essentially a money plan. A budget is crucial as it shows you where your money is going and can almost force you to make financially healthy money decisions. If you can learn how to make, and stick to a budget properly then you will be able to remain financially stable for the rest of your life.
Credit cards are a no-no.
As a 20 something, having a credit card can make you feel like you’re on top of the world. You can finally spend and buy whatever you want. But experts say one of the best financial moves you can ever make is to not use a credit card. Using credit cards allows you to fall into a debt trap that can take years to get out of and encourages unhealthy financial behavior such as spending more than you have or spending unnecessarily. And even if you can pay your credit cards back timeously, you are still wasting money on high interest rates. A great rule to live by is “no credit cards; cash or debit cards only”.
It’s never too early to start saving for retirement
Retirement may seem like its a lifetime away right now, but most people retire by the age of 60, which is actually not too far. So start saving for your retirement now. Put away a small amount of money each month in a pension plan and watch how your money grows. Plus the more you save and the earlier you start saving, the earlier you can retire, and who wouldn’t want to retire comfortably at the age of 50?
Financial planning is key
Financial planning is essential to being a money savvy individual. Financial planning takes into account all your goals, dreams, and aspirations. Taking into consideration your realistic earnings and income, and how you can map out your life. Do you want to own a car? What sort of car do you want? Do you plan on living in a house or apartment? Do you want to work in an office job or start up your own business? Do you want a family someday? All of these questions are important and need to be answered. Once you have answered these, you can start planning how much you need to save each month, how much you can afford to spend, and how you should invest your money. Can you save using a long term investment account, keeping your money out of reach for many years while it grows and matures, or do you need to save in a normal bank account which gives you easy access to your savings should the need arise? Remember to also revisit your financial plan annually and reassess where you are holding and where you want to be.