These Smart Finance Moves Can Help People In Their Early 20s

These Smart Finance Moves Can Help People In Their Early 20s

How you handle your finances in your 20s often have a great impact on your life later on. That is why as a young adult, you should start to pay attention to your personal financial status.

In this article, we share ten smart finance moves that can help you navigate the murky financial waters of the distracting glory days of your 20s. Read on for specific actionable tips that you can do right now if you wish to achieve most of your financial goals before you hit your 30s.

List your goals.

A smart financial move that those on their early 20s should first do is to make a list of all your goals, the things you want to achieve, and the timeline you wish to fulfill them. Treat this task as creating your own personal financial plan that will guide you throughout your 20s.

Feel free to modify it from time to time to match changes in your financial status like if you get a raise or if you change jobs. By assessing your personal and financial plans regularly, you become more conscious of your own money habits and develop ways to curtail your own spending if it affects your monthly budget plans.

And if you want to create a formal list of all your financial goals, you may consider looking up personal financial samples and forms online.

 

Educate yourself on different investment vehicles.

The next smart financial move that any twenty-something should do is to learn more about investing and money. There are different investment vehicles available for consumers today from government bonds to mutual funds. A simple Google search can teach you a lot of things within a short period of time.

However, if you want to make sure that the investment advice you receive is sound, you can go to your local bank and ask for the specific investment options they offer. In fact, some counties and states even offer free financial literacy classes that you can join for free. Just call your local government office ahead of time to schedule an appointment.

 

Start investing.

After researching and learning all that you can about the basics of investing, it is now time to start investing. Most banks and financial institutions will have experienced financial planners who can assist you in choosing the best investment vehicle to fit your investment risk profile.

It is best to start investing as a twenty-something since the law of compounding will be on your side. Take advantage of this and make sure to allow a portion of your income to the investment option of your choice.

 

Start saving.

We have mentioned earlier that putting your money at a bank is a form of investment. Despite the low-interest rates that banks offer, it is still a good idea to start a savings account at your local bank. As someone in your 20s, you will get a nice return on your money since you will start saving at a young age.

And if you prefer the security and little risk of just having a savings account, make sure that you choose a bank that can offer you a higher than the normal interest rate. But make sure to upgrade this form of investment to another investment vehicle later on once your source of income changes. This way, you get the most out of your money in the long run.

 

Avoid credit card debt.

Avoiding credit card debt is another smart money practice that twenty-somethings should practice early on. Aside from credit card debts’ negative effect on your financial report examples, it also makes it harder for you to pay off all your debt in the long term.

Avoiding credit card debt does not mean you should stop using a credit card altogether. Just make sure that you only spend the amount you can pay back on a monthly basis. Doing otherwise will lead you to a cycle of interest rates and fees and more debt. And no twenty-something wants that in their life.                                    

 

Create an emergency fund.

If you have read any book or article on money habits, you would find this next finance move familiar. And that is the importance of creating an emergency fund. An emergency fund is typically equivalent to 3 to 6 months of your current income.

As its name implies, you should only use this savings fund as a backup for when you are transitioning between jobs, for sudden health issues, and other dire needs.

The mere task of saving for an emergency fund for the first few months when you get your first job can already be considered as a major accomplishment in your early 20s. So do not forget to pat yourself on the back if you are able to accomplish this.

 

Prepare for retirement.

As early as your 20s or as soon as you enter the workforce after graduating in college, you should already have your retirement in mind. This is a smart financial move as it allows you to prepare for a comfortable, or even a truly rich, future if you plan your cards right.

Most countries have government mandated pension and retirement savings plans. So make sure that you avail of these plans through your employer. Or, if you are self-employed, make sure that you make voluntary contributions to these retirement plans from the start of your career.

As we have mentioned earlier, the younger you are and the earlier you start investing, the law of compounding will be on your side. And you will see greater benefits than if you start investing and saving at a later age.

 

Get health insurance.

Health insurance coverage is a mandatory benefit that most private and government institutions should provide to their employees. If you are employed by a private firm, for example, consider yourself covered. However, if you are self-employed, make sure that you choose and contribute to a health care plan regularly.

There are different kinds of insurance plans. And if you want to supplement the health insurance benefits that your current employer provides, you may always voluntarily subscribe to additional life and term insurance health plans. Contact a licensed health insurance broker for more information on how to avail of these health plans.

 

Pay off your debts.

Another sensible financial move that those in their early 20s should start doing is to start paying off their debts. This typically involves student loans and credit card debts from when you were in college. As we have advised earlier, pay off your credit card debts as soon as possible and make sure that you pay all your balance every month.

As for your student loan debts, start paying them off as early as possible. You do not have to exhaust all your monthly income to pay them off quickly. What is important is that you are starting to make monthly or quarterly payments on them. This will look good on your financial report and will help you attain a good credit score – something that will be helpful later on if you wish to make big purchases (like getting a mortgage or a car).

 

Make a spending plan.

A good way to make sure that you stick to all your personal financial plans is by following a spending plan or a budget plan. As a twenty-something, you learn a valuable skill when you start using even a simple spreadsheet to tabulate your monthly spending.

This is a skill that you can carry with you into adulthood and will tremendously benefit you as you plan a more financially stable future for yourself. And if you want a pre-made spending plan to use, just search for personal financial samples online and download the one that best suits your needs.

 

Learn new skills.

The last smart financial move that any twenty-something (or anyone, really) can do to help improve their finances is to learn new skills. By learning a new skill, you will have more avenues to market yourself – whether for a raise, a new position or for a shift to an entirely different career.

This tip also incorporates the need to continually be open to learning. You do not have to learn entire scholarly disciplines. Your new skill may be learning how to cook, how to bike, or even how to set up a blog. You may then use this skills to prepare your own food and thus save you money on takeout. Or, you can create your own blog as a side hustle. All these little new skills can then add up to a richer life literally and figuratively.

Our twenties are supposed to be the best time of our lives. That is what society says. After all, we are out of school, we have a new job, a shiny new car, a clean apartment, and all the possibilities in the world. Most people would readily grab away and experience as much of all these things as soon as possible.

But wouldn’t it be great to have and smartly experience all these things not only in our twenties but also beyond it? Think about it.

Written by: Lisa Smith, Ms Money contributor

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