5 important financial rules in your 20s
It takes a lot of time and discipline to understand how to manage money wisely. It wasn’t something that happened overnight. Some people go their whole lives without learning how to manage money.
You may still feel young and have plenty of time. Or think that you are invincible in your 20s. Actually this financial mistake can get you into trouble in the future. At this age, you can already think about retirement if you want to achieve financial freedom and retire early. The sooner you learn to budget, the better off your finances will be in the long run.
Here are the most important financial lessons you’ll need in your 20s.
1. Stick to a budget
Most young people have heard of or have an idea about the budgeting story. Maybe you’ve been tinkering with excel or some other app to track your finances. However, very few people can stick to a predetermined plan.
At the age of 20, this is the time when you have to start allocating every penny to put in savings fund Or where to spend it. This is especially necessary when you are already employed and have your own income.
The overall goal of budgeting is to know where your money is going so you can make the right decisions. You can spend money on shopping or a pleasant trip. As long as they align with what you’ve budgeted and your savings goals.
2. Leave 10% – 20% of your income for savings
Here’s another piece of advice you need to keep in mind in your 20s, recommended by most financial planners.
When your paycheck comes in each month, you need to know what to spend on fixed costs, variable costs, and finally savings. Fixed costs are the amount that must be spent for the basic needs of each person, such as rent, bills, meals, transportation, etc. And the variable cost is the amount recovered, the service at your discretion.
You should always put 20% of the money into your savings account every month. If your income is low, set aside only 10%.
3. Be realistic about your financial goals
Sit down and think carefully about your financial goals. Visualize the age at which you want to reach them. Write it down and find out how to make it happen.
You are more likely to achieve your goals if you write them down and make a plan.
For example, if you want to take a vacation abroad, stop daydreaming and make plans. Do some research to find out how much it costs you to take a vacation. Then calculate how much money you have to save each month.
Your dream vacation can become a reality in a year or two if you take the right planning and saving steps.
4. Solve your debt situation
Many people become satisfied with their debt by the time they reach 20. For those with personal loans, mortgages, or credit card debt, paying off debt will help keep your finances in check.
Maybe now, you see debt is a common thing. The truth is that you shouldn’t live your life paying off debt. Assess how much debt you have and create a budget to help you avoid debt.
There are many methods for clearing debt, but the common “snowball” effect is to keep people motivated. List all your debts from smallest to largest, regardless of the interest rate. Pay the minimum payments on all but your smallest debts.
Paying off debt will have a significant impact on your personal finances. This will allow your budget to expand even further. At the same time, it’s a good idea to have an extra amount to “throw” your savings.
5. Start an emergency fund
Without an emergency fund, you’re more likely to use your savings or rely on a credit card to pay for unplanned expenses.
Plan to have a sufficient amount of capital to cover any situation. The amount of an emergency fund usually ranges from 3-6 months of living expenses.
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