Once you are comfortably in your 20s, after graduating college and securing your first real job, you will likely look back on your formative years with frustration. Why did no one teach you about personal finance? What are you supposed to do with the money that’s accumulating in your checking account? Isn’t it too soon to start thinking about retirement? Being young and earning money is certainly more confusing than being young and broke.
Your 20s is an exciting time when you should experience plenty of firsts: first grown-up job, first new car, first house, first marriage, and hopefully, first steps toward financial security. If you are in your 20s and utterly befuddled by money, here’s all you need to know.
Set Financial Goals
It is hard to save and spend appropriately when you don’t know what you are saving or spending for. While you are still young, your financial goals can be almost anything:
· Get married and throw a lavish wedding
· Buy a house
· Travel around the world
· Go back to school
· Retire early
· Buy a nice car
Once you know what your financial goals are and by when you want to achieve them, you can calculate a budget to determine how much you must save (and how much you can spend) every month.
Stick to a Budget
More likely than not, you have already made a budget. Chances are, you have made several budgets, but you’ve never stuck to a single one. The thing about budgets — just like the thing about diets — is they aren’t going to help if you don’t follow their rules. Fortunately, there are a handful of tricks you can use to stick to your latest and greatest budget:
· Keep your receipts. A clogged wallet or pocketbook should remind you to track your spending and watch your budget.
· Start small. It’s possible you have been overwhelmed with too many spending changes in the past; you can ease your way into your budget by starting with small expenditures, like morning coffee, and working up.
· Post it. Tucking your budget away in some forgotten corner of your computer isn’t helping anything; hang your budget someplace you look every day, like your bathroom mirror.
Use a Credit Card
Credit cards should be scary, but in adulthood, credit is a necessary evil. Your credit score is a number that can influence dozens of aspects of your life; lenders always pull up credit scores before offering loans for school or homes, and plenty of employers investigate credit history to get a broader picture of job applicants. Experts agree that having no credit is bad (or worse!) than having bad credit, so if you don’t already have a credit card, you must get one right away. However, you should research different cards before you sign up; you want to find a card that is right for your lifestyle.
Keep an Emergency Fund
You should have insurance to cover the costliest emergencies — theft, collisions, medical disasters — but there just isn’t a plan for all of life’s expensive surprises. Thus, you should have liquid savings available in case you need some fast cash. Experts suggest having at least three to six months-worth of expenditures saved up in an accessible account. You should put aside at least 10 percent of your paycheck every month until your account is an appropriate size.
Start Saving for Retirement
Right now, your retirement is likely farther away than the number of years you have been alive. However, it is more imperative for today’s young people to save for retirement as the future of social security remains tentative at best. Saving for retirement can actually be surprisingly rewarding because the amounts retirement accounts generate are excitingly large: Depositing just $100 per month could net you more than $346,039 by the time you are 65, assuming 8 percent growth and quarterly compounding.
Being financially sound is not a one-time activity; you must boast good financial practices for your lifetime in order to remain safe and secure. Once you find your financial stride, you should strive to maintain it by staying focused with your efforts and organized with your documents.
Better financial prospects appear when you least expect them, which means you must be ready for new opportunities at any time. You should keep your online presence clean, your resumes fresh, and your credit history healthy in order to look attractive to any enticing new positions. Changing jobs could give you a better salary, better benefits, and better lifestyle than you ever expected.