The years after college graduation and landing your first job aren’t always known for savvy financial moves. There’s so much excitement for the first salary ‒ yes, but the moment salary falls into your hands is also the start of making greater life decisions. And by greater life decisions, we mean proper management of your finances to meet your regular budget, planned or unplanned expenses, investments, and savings for odds of getting married, building a family, buying a home, or travelling the world in the near future.
So where am I getting at?
That’s a lot for an introduction but I hope you’ll thank me afterwards. So, welcome to your 20s ‒ a decade of adulting and financial independence. For most of us, adulting means working at 9-5 schedules and then wearing a trendy face mask on a Friday night. While it’s okay to treat yourself for once in a while, your early years of adulting should focus on your preparation for the biggest changes in your life as you get to your 30s, 40s, and so on. To guide you through smart financial management, here are efficient ways that will best allocate your finances at your age.
Control spending
As much as you want to max out your credit card for your cravings, you have to set them aside and take control of your spending. Remember, financial success is not obtained overnight. So, now is the best time to build solid financial habits. Start with responsible spending as it is the foundation for your financial health. Monitoring your spending habits does not necessarily require a breakdown of your daily expenses on a spreadsheet (unless that works best for you). But you can use the general 50/30/20 rule to help allocate your expenses and direct your money more purposely towards its designated goals.
● Allocate 50% of your salary for your needs (Food, Bills, Transportation, etc).
● Allocate 30% of your salary for your wants (Skincare Products, Work Wardrobe, Travel, etc).
● Allocate 20% of your salary for your savings and future investments (Life Insurance, Retirement Funds, etc).
Set financial goals
Finding your inspiration is the best way to set financial goals. Think about what you want to achieve in the next five years. Is it purchasing a car, moving to a new apartment, or going on a trip? Attaching reasons to your goals can fuel motivation and increase your likelihood of achieving financial success.
Save for unplanned expenses
Let’s face it. Saving money is easier said than done, especially in your 20s when it’s overwhelming to spend your hard-earned money on something you badly want. But looking at the bills and emergency expenses makes saving a little more imperative. Think about the unplanned things ‒ medical costs, car repairs, a hole in the roof ‒ that require an emergency fund but you don’t have one. You’re screwed. So, while it’s early, start saving for unplanned expenses and get surprised by these rewards that you can reap if you start saving at a young age.
Build a good credit score
A great credit score can be a powerful tool that helps you qualify for loans with low-interest rates. You might say you’re still young for this but a good credit score is crucial if you’re planning to buy a house or a car in the future. Start building your credit history by opening a secured credit card or any credit-builder loan.
Invest in your future
Investing in your future might not seem urgent, especially when it’s decades away but you must take note that a long runway to retirement is exactly the reason for you to start saving now. People in their 20s won’t probably think about investing in life insurance because death isn’t something that they consider between the ages of 20 to 29. But this is exactly the time that people should be getting insured when the cost of premiums is lowered as compared to the premium cost when you try to apply at your 40s and so on.
