If you’re in your 20s, consider yourself lucky.
Many folks would give anything to relive their younger years and correct some financial mistakes they made, as it is tougher to right those wrongs when you grow older.
You can make positive decisions in every aspect of your life, but focusing on financial decisions is the most important.
Of course, you can start to become financially successful in your 60s or 70s, but it is simpler and more beneficial if you make the right decisions early enough: the power of compounding will work better in your 20s than it would at an older age.
Just as it could work in your favor at an earlier age, it simultaneously could work against you if you make the wrong financial decisions at an earlier age.
Investing early and investing for a large span of time could amount to a lot of fortune.
You don’t have to start with a lot of cash either; reinvesting the money you make will work out powerfully in your favor.
Do you want to know how to jumpstart your finances in your early adulthood?
Here are some decisions you can make to start your financial success:
Save as Much as You Can
It might seem unrealistic to find enough money to stash in your emergency fund, but you can achieve this goal if you save a set percent each month or each paycheck. You will eventually need this money, even if you think you’re financially stable enough to not need it. This fund may be helpful in the case of a high medical bill, a quick car replacement, or other emergency situations.
Invest, Invest, Invest
The earlier you begin to invest, the more time you will have to accumulate investment gains. Investing in your 20s may benefit you since you’ll have a larger span of time to allow financial growth than someone who starts at an older age.
The best type of investment to make is a medium or long-term investment––but short term investments without minimum holding periods could also be financially beneficial. If you are a real risk-taker, medium to long-term investments, such as BDO equity funds with potentially high returns, may be perfect for you. If all works fine with such an investment, you could be creating a huge fortune for yourself sooner than you think.
Invest in Retirement Plans
Contrary to what you might believe, it is never too early to start investing in retirement plans. Investing in retirement plans such as Roth IRAs pay great dividends.
Roth IRAs are taxed when paid, but if you withdraw at age 60 or above, they are completely tax-free. Of course, there are several other retirement plans you can opt to use instead, such as your company’s 401k;the bottom line is that it’s important to invest in a retirement plan that will secure your future.
Make Sure You have Health Insurance
One of the smartest decisions you can make early in your 20s is investing in health insurance. Health issues can occur at any age, whether you’re 20 or 70; but, even if issues concerning your health do not arise early, it is better to take necessary precautions.
Most employers provide health insurance for their employees and you can also opt in for some other insurance coverage. Many people end up in a huge amount of debt or have to file for bankruptcy because of medical issues.
This could be mitigated or avoided completely with adequate health insurance early in your 20s. Health insurance may not completely cover your cost of health, but it will go a long way in saving your finances.
Create a Balance Between Your Savings and Your Debt
Deciding whether to settle all your debt or to save your money is a tough decision in itself.
Of course, settling your debt might appear logical considering the interests that might accrue if you fail to handle your debt on time, but it is not always the most beneficial financial decision to make. It is important to save a good amount of money for unforeseen circumstances.
Create a Budget and Monitor Your Cash Flow
You don’t need to get married before maintaining a financial budget; you should have a budget for every financial decision you make in your life.
You don’t have to create a professional budget–make it as simple as you need. A budget will help you avoid spending your money wrongly and it will help you to keep tabs on each of your expenditures.
As a rule of thumb, you need to ensure that you make more money than you spend, but this can only be guaranteed by tracking your cash flow with a detailed budget.
Set Goals and Map Out Your Money for Those Goals
No matter how much you have in your savings, you still need to be meticulous when it comes to your spending. Setting financial goals is a great way to set your list of ways you will eventually attain those goals. The goal could be anything, but you need to draw a list of preference and set aside money ahead of time to attain the goals you have in mind.