Your 20s are crucial for developing habits that can shape your future. Becoming an adult comes with challenges that can easily throw someone off their track. It is normal to be broke in your early 20s, but the normality shouldn’t be part of you as you edge toward being 30. Although there isn’t a particular age after which you can’t achieve financial freedom, it is best to start planning your future while in your young adult years.
The gap between the ages of 20 and 29 is pretty huge. There is no reason why you shouldn’t take advantage of this time to mold your ideal life. Whether you’re about to graduate from college or are preparing to walk down the aisle, you need to make some financial moves before 30 because the early bird catches the worm.
Here are 7 things you need to do in your 20s if you are looking to achieve your financial goals faster:
1. Make a budget.
A movie can’t be made without a script. In the same way, managing your finances is impossible without a budget. You can’t get a clear understanding of the amount of cash that you spend out of your earnings if you don’t have a financial plan.
A realistic budget is a successful budget. Sticking to your financial plan is difficult if you have doubts about it from the start. The numbers you put down should resemble your life closely for the budget to work.
Be sure to gather your financial statements for use as references when creating your budget. Include all your fixed expenses, such as mortgage/rent, insurance, utilities, and debt. Let your variable expenses like clothing, entertainment, and groceries follow.
Cut down on the variable expenses as much as you can so that more of your money can go into savings. Don’t be afraid of doing away with some things that other people consider essential. If you find it difficult to cope with the budget, feel free to make a few changes.
If you want to learn more, check out our blog post on the 5 simple steps to create a successful budget.
2. Pay off your student loan debt.
Student debt can drag you down while you’re on a quest for prosperity. The more the interests pile up, the further you have to dig your hands inside your pockets. Saving money isn’t effective if your student loans will consume huge chunks of it in the future.
The best way of dealing with debt interests is to avoid them. Saving small percentages of earnings after paying your loan accounts for a bright future. As soon as you settle your student debt, you can deposit more money into your savings without worrying about high interest later. Ignoring student debt can also cause issues when obtaining personal loans due to low credit scores.
3. Customize your savings account.
A customizable savings account enables you to change various features so that it suits your preferences. A little customization to your savings account can work wonders. For instance, changing your account’s name from a blatant “Savings Account #012345” to something like “Quit My Job January 2021” or “2020 Audi Q7” can motivate you to save more money to achieve such goals.
If you are using a money-saving app, use what you desire to have as your account’s profile picture. The background image section can also work well as a vision board to keep you in focus. It’s difficult to veer off your saving culture if your savings account reminds you of your goal each time you access it.
4. Automate your savings.
Automation helps in dealing with forgetfulness, laziness, and reluctance. Saving can be a hard thing to turn into a routine. Since time is money and you can’t wait for nature to make it a habit, automating your savings can spare you all the trouble.
Being a student or someone chasing a promotion at work, busy schedules are likely to take up your time. The majority of today’s billings occur automatically. Automating your savings is necessary if you aren’t used to paying your bills manually.
Savings automation involves allowing part of your pay to go directly into your savings account. By doing so, you have no access to the money that you have committed to saving. Banking and other money apps are useful automation tools for helping you prioritize your goal of saving money.
5. Find a new income source.
After craving something for so long, putting your hands on it feels awesome. The bigger the goal, the more money you need to put into your savings to reach it faster. You may need to deprive yourself of the things that were once indispensable to you because of your financial sacrifices.
Getting a side hustle can speed up your savings growth without having to cut out any expenses. Side hustles range from what you can do to what you want to learn to do. If you are good at or fond of petting, spread the word in your neighborhood and let cats and dogs flood your home.
There are many freelancing gigs online where you can offer digital skills like image editing, graphic designing, and web development. Browse the jobs on social media and other forums related to your niche. Give out your skills as much as you can and reap the rewards.
My blog post on how to get clients fast can be a helpful start.
6. Start investing your money.
Investing money is one of the best ways to build wealth. There are lots of investment options out there. Some work better than others, while others don’t work at all for some people.
Before putting any money into any investment, gather enough knowledge on the subject. Do proper research and check the reviews of other investors. Start simple and only scale up when you start seeing the profits. It’s totally okay to invest 100 dollars!
Financial advisors and mentors can be helpful when dealing with investments. If you are convinced by their reputation, buy their services and let them walk you through the process. Once you start getting the benefits, you can save part of your earnings while investing back the rest.
7. Think about retirement.
A comfortable and enjoyable retirement isn’t possible without a proper plan to fund it. If you start planning for your future in your 20s, you can use compounding interest to your benefit. Saving for your retirement as soon as you get your first job gives you a chance to become an early retiree.
Keep in mind that setting aside a small sum of cash now for your retirement is much better than having to save a lot later. It’s pointless to postpone the practice of saving for your future when you can make a big difference by starting today.
If you are an employee, you should take advantage of retirement savings plans. The 401(k) account compounds all through your career, where contributions are taken from your paychecks. Alternatively, open a Roth IRA where you pay taxes for putting in money while making your future withdrawals tax-free.
In your 20s, thinking about financial planning feels like a pointless thing to do. Changing such a perception is essential if you are looking to enjoy financial freedom in the future. You can set yourself in a secure position by making a few smart decisions as early as possible.
Want more? Check out these financial tips for college students.