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Smart Financial Decisions To Make In Your 20s

If you’re in your 20s, some older folks will tell you something you probably don’t feel like hearing. 

They’d give anything to relive those years and correct some of the wrong financial decisions they had made. If they were your age, they’d do it all differently. They’d be in much better financial shape if they had just known what those decisions cost them.

Lucky you. You have every opportunity now to make the right decisions the first time around. Of course, you can become financially successful later in life, but it’s easier if you make smart choices early enough.

Here are some really smart decisions you need to make in your 20s.

Save Around 20% of Your Income

Stashing a lot of money in your emergency fund is harder than it seems.

But if it’s possible, you should save around 20% of your income every month through your 20s. Of course, you may not really need the emergency fund in the next five years, but you will eventually need it. The fund may save the day in situations of like a high medical bill, or some other emergency financial situations.

Make Sound Investments

Everybody is encouraged to invest, but the investment pays off greatly when you do it early enough. 

Investing in your 20s may pay off big time when you have a larger span of time to allow the money to grow. It’s better to go with low risk investments, so you’re not putting it all on the line at once. Set aside a certain amount for investment. It can be some of your savings, extra money you made from side hustling, or something else. If you don’t have the money, you won’t be able to invest.

But if you save some extra cash lying around, why not make it work for you?

Invest in Retirement Plans

Contrary to what you might be thinking, it is really not too early to start investing in retirement savings. Investing in retirement plans such as Roth IRA pays a great dividend. Roth IRA is taxed when paid but withdraw at age 60 and above tax-free. Of course, there are several other retirement plans you can opt into such as your company’s 401(k) but the bottom line is to invest in a retirement plan that would secure your future.

Make Sure You Have Health Insurance

One of the smartest decisions you should make early in your 20s is investing in health insurance. Health issues can occur at any age, and often, they are unpreventable. You could be 20 years old and break your leg riding your bike.

How are you going to pay for that without insurance?

Most employers provide health insurance for their employees, but you can also opt in for some other insurance coverage as much as you can. A lot of people end up in a huge amount of debt or file for bankruptcy because of medical issues, but this can be mitigated or avoided with adequate health insurance early in your 20s. Of course, health insurance may not completely cover your healthcare costs, but it goes a long way.

Take Care of Your Health

This is different than healthcare, but goes along with it.

One of the best things you can do for yourself financially is to take care of yourself. This not only includes your physical health, but also your mental health. A lot of people overlook the importance of mental health, but it’s hugely important.

Overworking is one thing that can damage your mental health. If you’re feeling stressed or overwhelmed, know that serious mental health conditions like anxiety and depression are covered by disability, and you’re able to take time off the job for these things without losing pay.

Create a Budget and Monitor Your Cash Flow

You don’t need to get married before you start thinking about budgeting. You need a budget for every financial decision you want to make.

You don’t have to create a professional budget—you can keep it simple. A budget will help you to avoid spending your money in stupid ways, 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.

It’s one of the few things that is actually as simple as it sounds.

Make Goals For Your Money

No matter how much you have in your savings, you still need to be meticulous in your spending. Goal-setting is a great way to set your list of preferences, and attain those goals.

The goal could be anything. It could be a vacation or a new car, but the bottom line is to draw a list of preference and set aside money ahead of time. This is a bit different than budgeting. You’re saving up cash for the things you want, and 20 years from now, you’ll be happy you have them.