Being a 20-something is awesome. You are just starting in your career and you’ve got a lot of pizzazz. Your youthful energy is at its highest. In this article, we are going to talk about 7 financial decisions you must make in your 20s.
By this time, fresh from college, look for a job right away. If you are the entrepreneurial type, go build your own business. The ultimate purpose is to finally earn your own keep. You are already done with school and it is time for you to practice what you have learned for almost 2 decades of schooling.
7 Financial Decisions You Must Make in your 20s
1. Start saving your emergency fund
As soon as the first time you receive your paycheck, set aside a portion of your income and funnel it to your emergency fund. It must be spent with emergencies only such as when you need to repair your leaking roof, medical emergencies, or worse, if you suddenly lost a job.
Emergency fund provides you financial cushion and gives you wiggle room on what to do when life’s not so favorable circumstances are thrown at you. The ideal emergency fund is 3-6 months worth of living expenses but you can adjust this depending on your personal choice.
2. Get an insurance
Insurance is necessary in your life. It gives you protection for the unexpected circumstances that will happen to you. We never know what lies ahead so we better be prepared. I got a savings plan with insurance rider when I was in my 20s. I am now enjoying the fruits of this plan and I am planning to funnel the funds I get from it to P2P lending. That’s what I plan to invest soon aside from my educational fund savings.
Recently, there is that negative perception about insurance thing because of insurance companies that are closing down. They fail to pay their insured members.
Choosing an insurance company needs careful research. The key is to look for an insurance company that is reputable and stable. It is hard earned money that you pay on premiums, after all. So better beware and be warned.
3. Advance in your career
You are young yet independent. Do not waste this opportunity to advance your career. Go advance schooling. Take up masters or doctor’s degree if it will benefit you in your career ladder.
This is the best time to advance your career since you are not saddled with so many responsibilities yet (supposing you are still in your early 20s, unmarried and not financially supporting a family).
4. Start owning a house
Owning a house is one of the most onerous financial decisions that you will make in your life. Why get a house when you are just 20? If you can afford to get a house while you are young, go for it. There are a lot of advantages of home ownership while you are young.
I myself got my house when I was in my 20s. I was so eager to have a house of my own that I was willing to sacrifice financially. Financial decisions entail opportunity costs. I sacrificed the opportunity of going out with friends, hanging out in disco parties because my house payment was my priority. I forego peer pressure to be in the latest fashion trend because I have a house mortgage to pay.
All my sacrifices paid off and my older self (30s now) is very thankful to my younger self (20s then) for getting a house.
5. Start investing
You can never be too young to start investing. In fact, the earlier you start investing, the better. You have a wide time horizon to grow your investments. You have also time to fail and make mistakes if need be and recover from it.
There are plenty of investing vehicles you can ride on to get you faster to your financial goals. You can choose money market funds, bonds, mutual funds, stocks and eventually real estate investing if you want it to be part of your portfolio. Keep in mind however that all these investment vehicles needed to be studied first if it fits your suit. You also need to align your investments to your goals and risk appetite. This is one of the 7 financial decisions that you must make in your in your 20s to avoid having regrets in the future.
6. Start thinking of Retirement
The best time to start investing for your retirement is when you are still young – in your 20s. When you are young, compound interest will be your best friend. You will have a big potential to earn because you have lots of time to work on your investments.
7. Improve your skills and conquer the world
Always improve your skills. Nothing beats investing in your own skills and knowledge. Embrace your youth and your power to create wealth and abundance. Explore the world and don’t settle for less, may it be in your career, finances and relationships. Go for what you want and aim high.
These are the 7 financial decisions that you must make in your 20s. Have you achieved one of those listed above?