Do you want to enjoy financial security once you reach retirement age? Everybody does. If so, you must make wise investments while you are still young and prepare for the future, as well as anything that may arise throughout your life.
In order to ensure that you enjoy future financial stability, read here in this article about the top five smart financial decisions to make while you are in your 20s.
Create A Debt Plan
Many people fail to live within their means during their younger years, which can lead to them racking up debt that they’ll still be repaying in their 30s and 40s. You, therefore, need to say goodbye to all debt you have as soon as possible, while developing a sensible attitude towards your finances.
Here’s what you need to do.
Create a plan that outlines steps on how to avoid debt. For example, you should pledge never to borrow money. When you borrow money you end up paying interest on top of what you owe which is never a good idea.
You should also pledge to always have an emergency fund. When you have a fully funded emergency account, you will not need to get into credit card debt in order to pay for unexpected expenses.
Lastly, you should also pledge to stick to a set budget. By creating a budget (and sticking to it religiously) it will help you to make intelligent decisions to ensure your financial stability in the future.
Invest in a Life Insurance Policy
Many twentysomethings think they are too young for a life insurance policy. If that’s what you also believe then you would be wrong. It is never too young (or too old for that matter) to have a life insurance policy. In fact, it is cheaper to get life insurance in your 20s than it is later on in life. So why not get insured and have peace of mind?
There are a variety of benefits for investing in a life insurance policy at a young age. Not only will you pay lower premiums, but your loved ones will also be financially protected from your student loan or mortgage repayments if the worst should happen to you. It just makes financial sense to have one.
Automate Your Savings
You more than likely want to save but are tempted to invest in the latest sneakers, the latest hot gadget everyone wants or a trip abroad with your friends.
Never rely on willpower to save money, as you will more than likely dip into the cash when your friend asks you to go for dinner or a drink.
Instead of relying on willpower to boost your rainy-day fund, you should consider automating your savings. Most modern banks allow their customers to automatically transfer a set amount of money from one account to the other, so you should pay the cash into your savings as if it is a bill once you receive your paycheck.
Here’s how to set it up. For example, if you get paid via direct deposit every two weeks, set up a small transfer to automatically go to your savings account twice a month.
Even something as small as $100 per paycheck can really add up. That amount monthly will end up being $2,600 at the end of the year. Not too bad for something that happens automatically.
Track Your Finances
You’re never too young to be sensible with your finances. If you take the time to care for your finances, you can guarantee they will care for you in the future.
Financial management is essential if you want to keep control of your cash flow. Tracking your finances can, therefore, help you to identify how much you are unnecessarily spending each month.
You don’t have to hire a financial planner or anything like that at all. You can just use a free smartphone app like Mint to help you manage your finances.
As a result, you can correct a financial mistake to develop a more responsible attitude towards money, which will help you to top up your savings and free up your finances to invest in your first home or in your first car.
Make Smart Purchases
Instead of wasting your money on clothing you don’t need and gadgets you don’t really want, start investing your money in products and services that will allow you to see a return on your investment.
Let me give you an example. You can choose to invest your cash in a startup company you believe in. You can also choose to purchase financial literacy training to improve your approach to money.
Choose to spend your money on things that add value to your future life. Your future self will be glad you did.