You can do so many things in your 20s. You could, for instance, build your career, travel to various cities and countries, spend time partying with your friends or colleagues at work and even buy a home. Think of your 20s as a blank slate.
Some of these goals, however, require money. Traveling overseas and buying a house, for example, requires a significant amount of cash. If you want to achieve these goals, you’ll first need a solid financial foundation.
Here are six smart money moves you should make to set yourself up for future financial success:
Many young people in their 20s aren’t thinking about getting life insurance coverage, but they should. It’s a financial tool for those major “what if” moments.
Life insurance offers a safety net for your beneficiaries and loved ones if you pass away prematurely. Some life insurance plans have an investment component. Life insurance and investment products can address various financial needs for every stage of your life.
When you’re in your 20s, you’ll find that the annual premiums for life insurance are affordable. You’ll also enjoy lower insurance costs when you’re in great shape. So make sure you purchase life insurance coverage while you’re still young.
Budgeting is another smart money move you should make in your 20s. Regardless of your current financial situation, you should always make a budget and follow it. The sooner you learn and start how to budget, the better off you’ll be financially.
Your monthly budget gives you the power to decide what you want to do with your money. It enables you to track your spending and prevents you from relying on your credit cards or spending too much money in a given period.
Budgeting takes a lot of time and effort. If you have a workable budget that you stick to each month, though, you can feel confident knowing that you’re handling your money responsibly.
Pursuing a career path that you love and have plenty of growth opportunities (both financially and personally) will pay off in dividends for many years to come.
Investing in a successful career involves getting on a career path that you’ll be happy for the long haul. It also means not quitting your job on a whim and placing yourself in deep financial hot water. If you don’t love what you’re doing currently, consider talking to a career counselor or coach to help you figure out your next move.
If you are in a career that you love, you shouldn’t stay comfortable in your job. Find ways to up your worth in the organization. Here are a few suggestions:
Investing the money and time into improving yourself will help you earn more money in the future.
While you’re in your 20s, start setting aside money that you’ll use to pay off the down payment on a home. This residential property doesn’t need to be your dream home or a huge house. Focus on getting a starter home.
Buying a house goes beyond giving you a roof over your head. This can help you build equity, which will come in handy when you get older.
You might think that saving for retirement in your 20s is a crazy idea. After all, you’re still young and the world is your oyster.
Saving money for retirement, however, has its advantages. You can retire sooner when you begin saving for retirement at an early age. You could start by opening an individual retirement account (IRA) or a 401(k). Keep in mind that compound interest is on your side here, so make sure you do this as early as possible.
Think of an emergency fund as an insurance policy for your finances. This saved money can give you peace of mind knowing that you have financial coverage in the event of an illness, a car accident, a large unexpected expense and other unfortunate situations that require money.
The general rule when building your emergency fund is to save at least three to six months’ worth of your living expenses. If you have consumer debt, try saving a starter emergency fund of $1,000. Then, bump up that fund once you’ve paid off your debt.
When you’re in your 20s, you have time on your side. Follow these tips to manage your financial affairs well, and you’ll be set for financial success later in life.