Being in your 20s is an important milestone—it usually means being independent of your parents and setting your own rules. A significant part of independence is being able to support yourself financially. It’s a great feeling to know you’re tracking your money and, hopefully, having extra cash to spend.
Being in your 20s is also an excellent time to start planning, particularly for when you reach your 30s.
Financial Security Helps to Plan Early
Start saving early to have a financially comfortable and secure future. Saving early gives your money time to grow. Even investing a small amount at regular intervals can offer you significant returns, in the future. Experts suggest saving 5% of your monthly income and increasing the amount as your salary increases.
Instead of following long-term goals, break them into a series of measurable and practical short-term goals. For example, if you aim to set up an emergency fund, set aside a certain amount every month. As you meet that goal, set a new one until you achieve your long-term goal.
Look at Yourself as a Financial Asset to Have a Financial Security
According to Jamie Hopkins, director of retirement research at Carson Wealth, your 20s is the perfect time to invest in yourself. You have fewer commitments and have more time to increase your value as a financial asset. Spend some time to learn about the different areas of personal finance. Upgrade your skills and make smart choices to move up the career ladder. Improving your skillset and furthering your career have more significant long-term impacts on your financial security than saving more.
Financial Security Goals Before You Turn 30
Not sure what goals to pursue? Here are some objectives you can aim for before you turn 30:
1 Manage Your Debt
Although it’s not wrong to take out a loan, getting rid of it within the scheduled time improves your credit score and increases your chances of taking out a more substantial amount in the future. Be it your credit card or student loan, pay your debt before or within the due date. Experts recommend using the snowball method in which you pay your debts from the smallest to the largest amount.
2 Create a Monthly Budget Plan
Although we’ve listed money-saving tips to secure your future, allotting your resources through a monthly budget makes it easier for you to meet your financial goals. List your income and expenses and set aside money for food, entertainment, bills, debts, and savings. Once you have a budget, it’s easier to save without having to think about it too much.
3 Create an Emergency Fund
An emergency fund makes you feel safe and less stressed during unforeseen situations such as a medical emergency, a sudden repair, or a job loss. An ideal emergency fund should equal three to six months’ worth of your salary.
4 Be Comfortable about Investing
Whether it’s through an employer-sponsored 401(k) or dabbling in mutual funds, investing money is an excellent way to generate passive income. You can speak to a financial advisor or use financial advisor apps to help you get started.
5 Get an Insurance Policy
An insurance policy protects you and your loved ones if you encounter an accident or when you pass away. Opt for a health and life insurance policy as soon as possible, as premiums are higher when you’re in your 30s. Make sure to cover your family members as well.
6 Plan Toward Retirement
Take advantage of your employer’s retirement plan as soon as you’re eligible. The sooner you start saving, the longer your money will grow due to compounded interest. Increase your contributions every year or at least every time you get a raise.
It’s not wrong to enjoy your 20s, but that doesn’t mean you should live from paycheck to paycheck. Planning for the future as early as possible helps you live a more comfortable and financially secure life when you reach your 30s.