Your 20s may be the most crucial time of your life. It is probably the first time you feel like an adult and that you have to manage your finances on your own rather than counting on your parents to sort all money-related matters.
Yes, your 20s are about having fun, living the moment, and absorbing the overwhelming joy of being independent is important to make wise financial decisions in your 20s. Every decision you make now will affect your future in one way or another.
Never Spend Money with No Budget
Before, you may have relied on your parents to
buy things, so you may not know that you need to divide your income to cover groceries, utility bills, and other daily expenses. You should always create a budget once you receive your monthly salary. Otherwise, you will start spending money on things you don’t actually need and disregard the essentials to find yourself struggling until you get your next paycheck.
Creating a budget will help you maintain your financial health and know where you stand financially. If you have any saving goals, budgeting is a great way to achieve them.
It is important to stick to the budget, but you need to adjust it if needed. For instance, the debt-free budget you have should differ if you got a loan that obligates you to pay monthly installments. In this case, you must review your budget, cut any unnecessary expenses and direct them towards paying the loan.
Start Building Your Credit Score
Building a credit score is not a thing that occupies the minds of people in their 20s, but it should. Your credit score plays a major role in your financial future. When considering applying for a home loan, a car loan, or a personal loan, the first thing any bank would look for is your credit score. The better your credit score, the bigger the chances of being approved for the loan and getting better terms and interest rates.
Set Goals and Start Saving
Saving money is something you should start early. Don’t just think about it, but actually start doing it in your 20s. Some of the things you can save for is a down payment to purchase your own home, or maybe a down payment for a car if you don’t have one yet.
Saving money shouldn’t always be linked to a goal; start saving for rainy days as well. There are a lot of emergencies you may face in life, like unexpected medical bills and urgent home repairs. With savings, you will avoid borrowing money and being in debt due to such emergencies.
Open a savings account, and deduct an amount of money from your monthly budget to deposit it in your savings account. Including savings in your budget will ensure you save every month. You can even set your savings account to deduct the amount automatically each month.
Insurance is essential to protect yourself and your valuable belongings. It can save you a lot of money on the bills of the unexpected emergencies we have mentioned above. Obtaining health insurance and car insurance is one of the smartest steps to take.