Wise Money Moves for People in their 20s
In pop culture, your twenties are not often synonymous with financial intelligence. It’s a decade for making mistakes and learning from them, figuring out which career path to take, and finding one’s bearings in a constantly shifting world. In other words, it’s a challenging time for many people, thanks to a highly competitive job market and increasing cost of living.
This is especially true for Millennials and Generation Zers, whose economic future is increasingly becoming more uncertain. Even before the COVID-19 pandemic, things were hard for younger generations, with older Millennials bearing the brunt of post-recession wage stagnation. But now the future is even bleaker as post-Covid global economic repercussions are yet to take full effect.
This makes financial savvy and money management even more important as these essential skills could provide people a line of defense for whatever crisis ensues.
- Manage your debt
Having debt in your twenties is quite normal, but unmanageable debt could keep you from enjoying the prime of your life. Once you hit your twenties, you’ll deal with other kinds of debt on top of your student loans. Before you start using credit cards, make sure you have a debt repayment plan. When it comes to paying off debt, it’s important to keep track of everything and stick to a schedule consistently to prevent interest from building up.
- Live within/below your means
Your twenties are a time to collect experiences, travel, and spend hard-earned money. But it’s always important to start saving money no matter your age and status in life, and one way to get started is to live within or even below your means. You’d be surprised to know how even the smallest sacrifices can make a difference to your finances.
- Establish a budget
Keeping a daily, weekly, and monthly budget is a proven money management technique. Buy yourself a new journal and start writing down your spending plan. It should include both your current and future income and expenses. This technique lets you monitor your spending and lay the groundwork for your future saving plans.
- Build a positive credit score
Your twenties are also the best time to start building your credit history. A positive credit score lets you qualify for home, car, and other personal loans. Your creditworthiness will be an important factor when you acquire financial services in the future, down to your retirement. Once you’ve built a good score, make sure to maintain it by staying on top of your loan repayments.
- Create short-term and long-term goals
It’s always better to save money if you’re doing it for something, whether it’s a small or big goal. It’s good to have both short-term and long-term goals to keep you motivated. When writing down goals, make sure they are specific and time-bound. For example, “Save $600 this month,” “Pay off a student loan in 2 years,” or “Buy first house 5 years from now.”
- Get insured
Any form of insurance is a wise financial move as it helps protect your assets and diverts your money into something you can benefit from in the future. And with any insurance product, it’s best to start it early so you can take advantage of lower premiums. Scour the market for providers and plans and find the one that fits your needs and goals. You can start with the four basic types: life, health, auto, and permanent disability.
- Start an emergency fund
An emergency fund is basically a fund you set aside for a rainy day. It could be anything, from an accident or unexpected illness to a natural disaster or unplanned move. This fund provides a safety net and helps keep you from relying on loans and credit cards.
- Develop a marketable skill
Nowadays, having a single source of income is no longer enough to stay afloat, let alone become financially independent. If you want to earn a little extra, consider learning a marketable skill. This could range from digital marketing and financial services to video editing and graphic design. If you have a craft or hobby, capitalize on this by selling your creations.
- Start saving for retirement
When you’re in your twenties, it might be challenging to plan and think of your distant future, but it’s a wise move to start planning for retirement early. As soon as you start working, make sure to channel some funds to your 401(k) plan and start saving up money that you can use to invest in assets like stocks, real estate, and so on.
Making wise financial moves in your twenties can be hard, given your income restrictions and high cost of living. But with a few strategies and sacrifices, you can be one step closer to financial independence and financial savvy.