Your 20s are full of firsts: Your first time living out of home, your first time handling your own finances and your first full time job. Of course you want to reward yourself for #adulting and for sure you have earned it but your 20s are also a super important time to set yourself up financially for the years to come.
Experts advise that putting away 25% of your total income will put you in good stead for saving in your 20s, ever heard the saying “living beyond your means?” well the 25% rule states that you shouldn’t be spending more than 75% in total on necessities like your phone bill, rent, utilities, travel and dining out.
By getting in the habit of saving in your early 20s you will set yourself up to save more in the future as your income increases, even if you can only afford to put away a small amount each week something is better than nothing.
Have a think about your lifestyle choices, could you perhaps get a cheaper car or live with a roommate to share the cost of housing and utilities? You might have to make some tough choices in order to prioritise saving in your 20s but it is doable, you just have to stick to a budget, plan ahead and learn to prioritise saving.
Another great way to ensure you are saving is setting up an account which automatically pushes money into your savings account each month, if you can’t see the money in your account then you won’t miss it right?! Have a look at a high interest account which means you will be making money on whatever you have been putting away without lifting a finger. The more you save the more interest you will earn, simple right?
The truth is, there is no time like the present to start saving, it will not only set you up for the future but it will give you a cushion when life’s little emergencies rear their ugly head and also give you the freedom to make choices based solely on what you would like to do rather than what you have to do because you are financially unstable.
Savings will give you choices in the future and rather than wasting your money on menial things you can begin to think about purchasing or investing in big ticket items such a house, stocks or take yourself on that around the world trip you have been dreaming about.
Here are the 10 financial commandments for your 20s from our friends at Kiplinger.com:
- Develop a marketable skill - before you can start worrying about what to do with your money, you need to earn some.
- Establish a budget – once you’re bringing home that cash money you will need to work out how much you have to spend on necessities and how much you can realistically save monthly.
- Get insured – when horrible things happen to you – say a trip to the emergency room overseas or a fire in your apartment – Insurance may save you from shelling out thousands and thousands of dollars. Read more on why you need travel insurance here and if you are renting why Renters Insurance is a great idea.
- Make a debt-repayment plan – while debt is a reality for most young adults, it’s important you get on top of it early. Make a plan to tackle your debt and stay away from credit cards!
- Build an emergency fund – Insurance alone won’t cover all of your problems so make sure you have an emergency fund on hand as an extra precaution.
- Start saving for retirement – I know it may seem forever away but the sooner you start saving for retirement the better, for example if you are 25 and out away just $100 a month (on an 8% return) with quarterly compounding (interest earned) you’ll have $346,039 by the time you turn 65. Say hello to Caribbean cruises and cocktails al paid for with cash!
- Build a credit history – It’s a double edged sword, having no credit is as bad as having bad credit, so you’ll need to take on some debt think a mobile phone plan rather than a 10K credit card though.
- Quit the bank of Mum and Dad – I think this one is pretty self explanatory, but try and stand on your two financial feet as much as you can.
- Clean up your online presence – Delete the party pictures, delete the dodgy Halloween costumes. Whatever you wouldn’t like your grandma seeing your employer doesn’t want to see this either. Make sure you are promoting to the world a positive persona.
- Get your financial documents in order - File and save your birth certificate, household bills, insurance policies etc. It’s up to you, not your parents to have all of these documents kept somewhere safe.
Image credit: pixabay.com