Your 20s is the most important decade of your life financially. Really. It is a crucial decade in learing how to manage your money. Unfortunately, many do not learn (or prefer to wait to learn) until their 30's and 40's.
In your 20’s and don’t think that you need to worry about your security later on down the line, right? You can always start saving in your 30's and 40's right? WRONG. Often times, rather than saving, investing, and building a career, many 20-somethings instead use these years to rack up debt and enjoy a lifestyle beyond their means. While there are many things that 20-somethings should focus on, here is a list of five that can get you started:
Oh yea, before we start, you might want to consider this idea: if you begin saving around $1,500 a year, beginning at the age of 25 years old, and you save this for 40 years, by the time you retire you would have $600,000 saved to tack onto your retirement pay. If you wait until you are 40 years old, you would only have $375,000 by the time of retirement. That’s a whopping $225,000 difference!
1. Spending Less Than You Earn
The most important financial habit that a young person can learn is to spend less money than he or she earns.
In order to master this principle quickly, make sure your fixed expenses such as rent are not too high. Then, begin to find ways to keep your spending (entertainment, dinner out, clothes, etc.) in check. Learn to balance your checkbook monthly by using internet banking to keep on top of our accounts. Make whatever adjustments are necessary in order to make sure that you spend less than you earn every single month.
2. Become A Regular Saver
Try to put a little bit into a savings account each month (or each paycheck). Setup your savings account to auto transfer money each month from your checking account into savings — even if it’s only $10 a month. The habit you establish is the important part! Also try to increase the amount that you save each month. Rather than letting your lifestyle grow larger as the years go by, try growing your savings! If you get a raise at work, raise the amount of money you are putting into savings. It's that simple.
3. Become A Regular Investor
After you mastered the art of regular saving, it’s time to become a regular investor. The most common method is through 401(k) participation. If you have a 401(k) offered at work, it’s a great option for you because you can automatically deduct money from your paychecks. If you don’t, then you have to manually move money from your savings to retirement accounts such as an IRA.
A great way to get started in the stock market is by stopping in and visiting with one of our financial advisors at Raymond James Financial. they can help you set up a plan that fits your income and your lifestyle.
4. Build Your Skill Set
Focusing now more towards your career, you need to continue to develop your skill set. Most people learn more in their first few years in the working world than they do in four years of college. Use the opportunities at work to develop skills that will benefit you both today and years from now. Take on unique challenges so that you can gain the experience and the skills they offer. The more experience and range of skills that you develop over time, the more opportunities will be available for you as you progress through your career.
5. Build Your Network
Just as important as your skills, the relationships that you develop will also increase your opportunities exponentially. Networking, especially early in your career can be the difference between a fast track career and a stagnant career. Get to know people in your company, in your industry, and even in other industries. You really never know when a certain relationship will pay off. You may find yourself looking to switch jobs in a few years, and these relationships will be excellent resources to help you reach your objective.
While finances may not sound like a fun part of being 20, think of it as getting a head start on retirement that will pay off big down the line.
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