Heyyyy Finance Fam!
So... I was thinking about somethings that I wish I would have started earlier on my financial journey and I wanted to share them with you.
Getting off on the right financial foot in your 20’s can pave the way to greater financial wealth later in life. Instead of making positive paths to financial independence, many young adults create negative financial situations that can take many years to resolve. Here are a few wise moves in your 20’s that can pay off in the long run.
(Note: This is not financial advice)
See if you can accomplish these goals before your 30th birthday:
1. Have financial goals. Having financial goals is an effective first step to reaching financial independence. A person’s bank account may demonstrate whether or not they have set any financial goals.
Set some long and short term money goals. Then, track your progress toward meeting them.
2. Acquire all the insurance you need. In our 20’s, many of us still live like we’re in college. But it’s important to be prepared for the worst. Protect your belongings, health, income & family. Also, the younger you are, the cheaper some insurance policies can be. Ex: Life & health
3. Establish an emergency fund. Too many people live paycheck to paycheck. An emergency fund will allow you to handle those inevitable financial bumps in the road. Whether it’s the loss of a job or a blown transmission, you’ll be able to handle it. The minimum goal is to accumulate six months of living expenses, but even a few thousand dollars is helpful with padding your emergency fund.
A simple savings account is an effective way to get started. Set aside a little from each paycheck and you’ll eventually have a nice little nest egg.
4. Max out your IRA. The contribution limits are $6,000 in 2020 for both Traditional and Roth IRAs. This might be a stretch when you’re in your early 20's, but you can pull it off if you make this goal a priority.
5. Contribute enough to receive full benefits on any employer-matched retirement accounts. For most businesses, that will mean a 401(k). Any matched contributions you receive are equivalent to free money.
6. Create a second source of income. Find another source of income that provides at least $1000 a month. It’s a great cushion against any unforeseen expenses. It can also be useful for building your emergency fund or adding additional funds to your retirement account.
There are plenty of freelance opportunities available online that can easily provide $1000 or more per month and are flexible enough to accommodate any schedule. Also, if the current pandemic is serving as a guide, most people have learned quickly that 1 source of income is NOT ENOUGH.
7. Become a homeowner. It’s debatable whether renting or buying a home is better in the long run. But, having a place to call your own has many advantages. Most importantly, you’ll build equity over time. Homeownership is a form of forced savings.
Once you’ve settled in and expect to be in one place for a few years, give homeownership careful consideration.
8. Be free of student loan and credit card debt. Most student loan payback periods are 10 years. It can be even longer if you choose to consolidate. Try to be free of your student loan debt before your 30th birthday. The same goes for credit card debt.
Avoid creating unnecessary debt. It’s like running against a wind that won’t stop blowing.
Also, take full advantage of your grace period as all funds paid to your student loans go to the principal balance, not interest
Accomplishing as many of these goals as possible will help to ensure that your middle age is free of financial struggles. A strong financial foundation created in your 20’s can pay off for the rest of your life. Strive to achieve these goals and formulate your own. Planning and self-restraint are useful for your financial well-being.