Not many people in their 20’shave gained financial discipline and maturity. Although it might seem that you are still too young to worry about bigger responsibilities in the future, planning early can keep you well ahead in the game.
Save a Little
Saving at this stage may be too early in the mindset of most in their 20’s. Particularly if you just got off from college, you might think that you’d rather have fun than worry about distant life changes such as retirement, and saving could ruin your enjoyment plans for today, right? On the contrary, building the habit of saving as early as now can help you become financially free sooner. If you dream about retiring early one day, one of the things you should learn first is the habit of saving. It doesn’t have to be that huge, what’s important is that you get started. Even if you just save 10% of your salary today, you’d have more funds in the future compared to if you started saving 20% 10 years later.
Live Within Your Means
Again, it’s hard not to spend every paycheck on things that you weren’t able to buy while you were a student. But earning your own income doesn’t necessarily give you much financial advantage. In fact, there are more obligations that you have to worry now. If paying for your car or rent will put you into financial distress, consider moving back in with your parents. It may not sound independent and obviously contradicting to your views as a young adult, but it can save you a lot while you’re yet to stand up on your own feet.
Start To Pull Away from Debt
If you have student loans left, it is always best to prioritize getting rid of this in order to focus on other goals sooner. It’s hard to save up for a home or get married if there are huge responsibilities left behind, so it’s best that part of your saving plan would be allotted towards debt reduction.
Build Your Emergency Fund
Before any major endeavor, you should put money into your rainy-day fund. Illness, accident, or job loss doesn’t typically occur to people in this age group, but you have to remember the fact that you are not invincible. A three to six months worth of emergency fund can give you safety net during these unforeseen disasters and can save you from impending financial doom.
Diversify Your Portfolio
Kudos if you’ve been able to stick to your saving plan, but saving alone will not give you the best returns on your money. You can go a long way with little experiments on low-risk and high-risk investments which can provide you extra funds which are impossible to earn in a regular savings or time deposit.
Start Working on Long-Term Goals
Though starting your own family or buying a home may be far away, it’s smart to visualize it as early as possible. If you figure your goals earlier, you can come up with a financial plan that is aimed to reaching those goals soon.