Your 20s is probably the most important decade of your life. The choices and habits you learn during this period are going to impact your lifestyle in your 30s and beyond.
You are either going off to college or entering the work-force now. And chances are at this phase of your life, you are making money decisions entirely on your own with no adult around to tell you what to do. Unfortunately, if you are anything like most young adults, you know nothing about financial literacy and good money habits to set yourself up for success down the line.
Thankfully, we have listed our best money habits that when implemented will help you make the most of your 20s while also building a financially secured life.
Don’t spend more than you make
This is probably the most crucial money habit you need to learn. If you can manage to keep your spending less or equal to your income you will still come out ahead and not be owing money to anyone.
Sure, it is tempting to want to spend your money as it comes in. You’ve earned the money and now want to spend it on things you are interested in. The problem is, you may wake one day and find yourself buried in debts.
Learn how to track your spending
How can you manage your spending if you cannot track what you are spending money on?
Tracking where your money is going ensures that you are aware of your spending money habits. It provides you with knowledge of what you’re doing with your money and if you’re spending it wisely.
Learn how to budget
Being able to plan your spending, sticking to your budget, and ensuring that you can pay off any credit loans is undoubtedly the best way to manage and extend your income to the next paycheck.
When correctly done, your budget should help you allocate money to those essential recurring expenses while also setting aside an amount for building up your emergency and investment funds.
Set up an emergency fund
Think of your emergency fund as a buffer for your life savings. You do not want to dip into your investment fund when faced with an emergency.
If you think you are too young to face any emergencies, think again – unexpected medical expenses, a house repair or a broken-down car, happen without any warning.
The emergency fund will ensure you sort out these events without wiping out your savings. Be sure to build up the fund to at least six months of your living expenses.
Start contributing to your retirement fund
You are too young to start thinking of retirement – I get it. But here is the thing, time rolls by so fast that before you could blink an eye, retirement is already staring you in the face.
Take advantage of compounding interest to stack up a nice nest-egg for when you retire. The earlier you start contributing to your retirement fund, the more time the money has to grow.
Learn how to invest
Once you have saved up a significant amount – your investment money is different from your emergency fund – you may want to put them into an investment fund.
Now you may want to hire a financial advisor to recommend which investment, based on your personality and goals, to invest in.
Being in your 20s is your greatest asset; make it count! Take advantage of compounding interest to grow your money. While you are at it, be sure to diversify your portfolio to spread your risk, and as you get older, become more conservative in your investments.