Making wise financial decisions in your twenties can help you achieve long-term financial achievement. In your twenties, you may face more financial obligations such as household expenses, utility bills, loan repayments, credit card bills, and so on. Taking charge of your money from a young age will therefore make it simpler for you to attain your objectives later in life.
When it comes to money, it’s easy to fall victim to the ‘ignorance is bliss’ approach, that too when you are an young adult. It’s difficult to concentrate about long-term financial accomplishment when you’re always worried about the bills and expenses that are due the following month. However, if we start early and create some sound financial habits, we will be able to easily set ourselves up for long term financial prosperity. Your twenties are a good time to set the basis for a financially secure future. This is the age to lay the groundwork for your 30s, 40s, 50s, and even beyond.
Here are top 8 money habits you can start with today:
1. SET FINANCIAL GOALS – Setting attainable goals will help you remain on course and accomplish your objectives. Establishing a financial goal is a critical financial step that may assist you in getting your money in line. For the best outcomes, set quarterly, biannual, and annual goals. Your objectives might be divided into small and large ones. While creating financial goals may appear to be a lot of work, there are various online internet resources and apps that may assist you. It is also critical to keep up to your goals after you have established them.
2. ESTABLISH AN EMERGENCY FUND – Maintaining an emergency fund not only protects you in the times of need, but also allows you to take calculated risks and thrive. One of the most important things you can do in your twenties is to set up an emergency fund to handle any unforeseen expenditures, such as medical costs or house or car repairs or any other such costs which cannot be ignored. Your emergency savings can assist you in avoiding taking out a loan or dragging a credit card balance, thereby saving you from interest costs. Experts normally advise saving three to six months’ worth of spending in a separate savings account or in a liquid fund.
3. GET INSURED – We should never undervalue the importance of insurance, whether it be life or health insurance. As we have little control over disasters, the utmost we can do is to be monetarily equipped by getting insurance. All types of insurance are required, and purchasing insurance is a healthy financial habit to develop in your twenties (as the insurance premiums will be low in your 20s). We must also ensure that our family members are protected by insurance. In any case, use prudence while selecting the right insurance package for you and your family.
4. SAVE FOR YOUR RETIREMENT – Almost 77% of Indians rely on their kids for financial support after retirement. And if you don’t wish to be one of them, you must begin to think about retirement when you’re in your twenties, when you have the time, energy, and money to plan a comfortable post-retirement lifestyle. The sooner you start saving for your future, the more it can increase over the course of time. Many employers will also match your pension contributions up to a specific amount, which is an excellent way to increase your retirement savings.
5. BUDGET YOUR INCOME AND EXPENSES – One of the most crucial things to learn in your twenties is how to budget well. Every month, you should keep track of how much money gets in and out of your bank account. Every individual and family requires a budget. A budget is just a tool for keeping track of all of your income and expenditures. It gives you total control over your money and lets you to know where all of your money is being spent. Budgeting will enable you to clearly view the purchases you’ve made, manage your monthly bills and EMIs, evaluate your income and spending by category, assess your yearly income vs. expenses, and much more, allowing you to get control of your finances.
6. INVEST YOUR MONEY – Investing is one of the most effective strategies to accumulate wealth. Everyone should begin investing in their twenties, as soon as they start earning. To make investing easier, learn as much as you can early on in your career. Your wealth has the ability to multiply many times over, and you can allow yourself to take risks while you are still young. It isn’t only about equities, bonds, gold, or real estate. There are several methods to invest and grow your capital. The more diverse your portfolio, the better it is in terms of risk management. Along with investing, you should evaluate your investments on a regular basis (maybe half-yearly or yearly), depending on your financial goals.
7. REDUCE IMPULSE SHOPPING – In our young age, we generally go out for shopping in a big supermarket store. While doing so, we would have experienced that we go to a supermarket store and gotten more than what we expected to get.
This is called impulse spending and a trick to avoid this is to make a shopping list and stick to it. In fact, we can get our groceries and other essentials in a nearby local store than from a supermarket. If you do this, you will avoid purchasing all of the unnecessary items. The vast majority of e-commerce websites are designed to entice impulse purchases. Reducing your internet purchasing will also help you save money.
8. AVOID EXPENSIVE EMIs – If you have an education loan, a personal loan, or credit card debt, you must make it a goal to pay it off in your twenties. Owing money to a lender can harm your credit score due to the proportion of credit you utilise, leading to a lower credit score. If you have a substantial amount of debt, lenders may perceive you as a high-risk borrower, which may lower your prospects of qualifying for additional financial solutions. Aside from impacting your credit score and qualification prospects, carrying debt for an extended period of time may cost you a lot of money in interest costs. Take the time to devise and stick to a clear debt payback plan. Some experts propose setting aside 30% of your take-home income for debt reduction and savings. If you want to pay off your debt faster, you may allocate more of your income to that purpose. If you have debts on many credit cards, you might consider debt consolidation. Debt consolidation can help you reduce the amount of accounts you have to pay every month and may provide better interest rates than a credit card.
To summarize, knowing your money may help you avoid excessive debt, spend intelligently, and routinely save for the future. Hence money choices taken in your twenties may have long-term relevance for your financial condition.
