Are you in your 20s and worried about your future? I am just as clueless as you are and I hope that this article helps us to learn and be aware of how we should be planning for our future. Growing up into an adult can be very daunting as we really don’t know a lot of things about making money and who doesn’t want a better life when we retire?
These are some goals that you should be targeting in your 20s and try your best to follow them. It is okay if your circumstances don’t allow you to implement all these right away but it is still good to slowly adjust and slowly get used to being smart with your hard-earned money.
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1. Build Up Your Credit Score
All young adults should start by getting themselves a credit card that would give them the benefits they desire. A credit card is the best way to start building your credit score if you handle your bills well. Remember, you always want to pay in full amount every month and you have to do it consistently for a few years for your credit score to be good.
With a good credit score, it gives you more options to get a loan from banks with better interest rates and also larger loan amounts. You can then use the money to buy a house, a car, or even start a business. However, I want to emphasize that you should take good care of your credit card debts as they have insane interest rates for late payment.
2. Free Yourself From Any Bad Debts
Bad debts are essentially debts that do not make you any money. This can be credit card debts, auto loans, and even student loans. As a rule of thumb, anything above 4% is considered bad debt and you should be looking to clear those debts first.
In a case where your debts allow you to make money from them, meaning to say that if you get a mortgage loan and the monthly repayment is $1,000 a month but you rent out the house for $2,000 a month which gives you a profit of $1,000. In this case, it’s good debt as it allows you to have an income of $1,000 every month through the debt to buy the house.
3. Have 1.5 Times Of Your Yearly Expenses Invested
If you don’t already know about the power of compounding, it allows you to grow your money tremendously over time and you will be shocked by how rich you can get after investing for a while. This is just a rough gauge for you to aim and achieve for your investment.
Let’s say you spend $1,000 every month, then your investment amount should be at least $18,000. This is very achievable and it is just smarter to get into investing as soon as you can so that your money will work for you to get more money.
4. Have Multiple Source Of Income
At this age, you should be most motivated to try out new things, and what other ways can be more practical than to try out different ways of making money outside your day job. We should always ensure that we don’t rely on just one source of money as you can see from the recent covid-19 situation and just how it disrupted the world as many people lost their jobs.
You want to ensure that you have a side hustle that allows you to make money without putting in as much effort as your day job. By doing so, you are not getting more income, you are also able to use that money to take of your expenses or even use it to expand your investment portfolio.
5. Save 25% Of Your Income
It is always important to save some of your money so that you can get ready to retire. In this case, you should be aiming to save 25% of your income every month and you can store your money inside a savings account that offers a good interest rate.
You should also track your spending every month and divide them into categories. Firstly, you want to identify all the mandatory spendings such as utility bills, food, and transportation expenses then total it up. Afterward, you would want to identify the amount you have been spending on discretionary items, items that you spend to satisfy your wants but you don’t really need them. You have to decide if you want to cut down on spending on things that you don’t need like eating at a fancy restaurant or buying 100 clothes that you are not wearing.
Afterward, you just have to ensure that the balance you every month is being invested so that you won’t be tempted to spend that money. This would help you to quickly grow your savings and investment portfolio as you have better control over your spendings.
At The Bottom Line…
You should be trying to live below your means in your 20s as it is the age where you are most motivated and energetic to make money. It is okay to make mistakes as those mistakes will then be the asset that teaches you what to avoid and not do. If you stay disciplined and always stick to your budget, your money will definitely grow and your efforts will be rewarded later in your life.
Don’t be afraid to try new things in your 20s, try venturing into businesses, and see what works. Even if you fail in your 20s, it is okay because you are still young, you can always try again. Just invest consistently and let your money grow.
