5 Smart Financial Moves to Make in Your 20s
Your 20s is one of the most exciting times of your life – and you want to make the most of it. It's also a great time to make the most of your money and start working toward your short- and long-term financial goals.
Here are 5 smart financial moves you can make in your 20s for a brighter financial future:
1) Build your credit score. A good credit score is essential in securing the affordable financing you need to reach your goals later on in life, such as buying a home. You can accomplish that by paying your bills on time, catching up on overdue balances, and avoiding opening multiple credit accounts and running up high balances. You should also monitor your credit regularly to check for errors and fraud.
2) Set a budget. The most important step in building financial security and independence is creating a budget. Start by tracking all your spending each month. This includes your regular bills, such as your rent, car payment, cell phone, etc., as well as money you spend on food, entertainment, and other activities. Once you know all your expenses, create a monthly budget on a spreadsheet or a budget app to assign dollar amounts for each spending category. When making your budget, think about what expenses you could eliminate or reduce – and always allow a line item for saving money.
3) Build an emergency fund. One thing you will need at every stage of your life is an emergency fund. Because let's face it, life is unpredictable and you never know if you might experience a job loss, illness, or even a global pandemic that would impact your income. To make saving easier, set up automatic transfers from checking to savings.
4) Establish a plan for repaying debt. With the high cost of tuition, you may very well have accumulated student loan or other debt. Try to establish a plan for paying off your debt sooner either by consolidating your debt or putting more money on the principal by making extra or larger payments.
5) Save for retirement. Okay, it's hard to think about retirement when you're just building your career, but you actually have a great advantage on your side – time. With the power of compounding interest, you can build your retirement savings considerably if you start when you're young. If your company offers a 401(k) or other retirement plan, contribute to it, especially if they offer a matching contribution. Even if you have to start small, get in the habit of saving for retirement regularly.
You definitely want to enjoy this amazing time in your life. But there's no reason why you can't do that and enjoy the rewards of building a strong financial future in the process.