20 Financial Skills You Should Master in Your 20s
The financial skills and habits that you form in your 20s can affect your finances for years to come. It is important to be proactive and to work hard to develop the financial skills you need to really take control of your finances early. Here are 20 skills you should master in your 20s:
1 – Give Every Dollar You Earn a Purpose
A budget helps you decide when and how to spend your money. It’s OK to splash out sometimes, as long as you have a plan and you can afford it. Your budget gives you that power. Start creating and following your budget now so that you can stop stressing about money.
2 – Have Regular Budget Meetings With Yourself !
Take five minutes each night to go over your budget. This will help you stay in line with your spending and give you a clear picture of how you are doing for the month. If you do it each night, it should only take a short while. You should complete the budget check whether you are single or married. Once you are married, it is important to plan so that you can have quick and effective budget meetings.
3 – Balance Your Accounts Each Month
It may seem like a lot of work for very little payoff, but balancing your accounts is a necessity. This can keep you from overdrawing your account and paying unnecessary late and overdraft fees. It can also help you to catch identify theft or see if someone has stolen your account information.
4 – Set Regular Financial Targets
Setting clear financial targets (NOT goals) can help you stick to your budget. You should have long-term, mid-term and short-term financial goals that you are working on each year, and you achieve these by hitting your targets. You do not want to overcomplicate this, but you should check your progress toward these targets/goals on a regular basis, such as during your monthly financial check session.
5 – Set Up A Financial Plan
This plan will take you through all of your major financial steps from buying a home, to paying for your Children’s’ university/college tuition. It can feel overwhelming to sit down and plan it out all at once, but it can help you prioritise your goals and so list your targets in order of priority and know when and how to spend your time. It is always helpful to meet with your Independent Financial Adviser (IFA) to do this. It is well known that people who do not have an IFA end up with less money than those who do!
6 – Start Contributing Towards Your Retirement
You should start contributing to your Employer’s scheme (if there is one) and/or a Person al Pension or other retirement plan when you get your first job. Most people at this stage of their life think retirement is a world away, but even a small amount when you are young will reap much higher rewards than delaying and putting in more money in the future, because of the “miracle” of compound interest. A good goal to work toward is to earmark10% of your net income to saving for retirement. If you can’t contribute this much right away, it’s OK to work up to it as you increase your income and pay off debt (such as credit cards).
7 – Perfect The Art Of Finding A Deal
There are a lot of ways you can save money on things you normally buy, like clothing or food. This may mean learning the best time of year to buy things or to find a deal on your car. You can find ways to save on everything from your groceries to your furniture. If you make looking for a deal a habit, you will be able to save significantly over the course of your life.
8 – Become A Smart Shopper And Stop Impulse Purchases
A smart shopper is a bit different from a deal hunter. Once you have perfected the art of finding a good deal, you need to become a smart shopper and determine if you need the item before you buy it. That does not mean you should not buy things you want, but you should be able to classify it as a want and make sure that you have the money available to cover it without dipping into savings. A good idea is to wait at least 24 hours before making a major purchase, and that includes financial services products.
9 – Shop With A List
One of the biggest ways you can save money while shopping is to shop with a list and stick to it. This is a simple habit to start and only takes a few minutes before each shopping trip. If you have a clear list in mind, it can help you rein in your impulse spending, which can save you time and money. Plus, a list can help eliminate the urge to make a second trip to the shops because you forgot something, which saves you money on fuel and additional impulse purchases. Take the time to make a list before each of your spending trips and the savings will start adding up.
10 – Plan For Seasonal Expenses
These expenses may be things like holiday shopping, vacation spending, taxes and home repairs. If you know that expenses come once a year, set aside money to cover them each month. This will make it much easier to pay for these major expenses without having to dip into your savings or use a credit card. Taking the time to identify these expenses and planning for them will help you build more net worth and a solid financial future.
11 – Stop Relying On Credit Cards
One of the financial worst habits you can develop is to rely on credit cards to cover your daily expenses when you go over on your budget. It is important to have a good emergency fund and to plan so that you do not need to use your credit cards. Pro tip: Stop using your credit cards by not carrying them with you. Take the money you have out of your bank and spend that – once it’s gone, you can’t spend it twice!
12 – Take Advantage Of Employee Benefits
Some employers offer Medical (and other) Insurance. Also, when it comes to retirement savings, an employer-matching contribution is basically free money for your retirement (if available). You should take full advantage of any employer match your company can offer you. Other benefits like stock options and other insurance can help you financially, depending on your situation. Be sure you understand and take advantage of benefits available through your employer.
13 – Continue To Network
It is important to keep your CV updated so that when you hear of a good job opportunity you can take it. It is also important to continue to build your professional network, even if you like your current job/career. A strong professional network makes it much easier to find a new job when you are ready or may even present you with a great professional opportunity, even when you’re not looking.
14 – Save Money Each Month
Another great habit to form is to regularly put money into your savings account each month. You can even have your savings automatically withdrawn from your current account and put in your deposit account via automatic transfer. Set a target to save 10% of your income to put toward your long-term goals each month. Setting aside the money automatically can make it much easier.
15 – Give Your Money A Purpose
It helps to stay motivated with your savings by giving each Dollar you save a purpose. You may set aside some money for your dream holiday, some for a down payment on your future house, or save for your Child’s college fund. You may also have some cash that is used primarily for investing and wealth building. Keep track of what money is for each goal, and take the time to track and target your progress.
16 – Protect Your Savings
If you find it easy to dip into your savings account when you are running short, you need to find a way to protect your savings. Your emergency fund needs to be easily accessible so that you can cover unexpected expenses right away, but you can move the rest of your savings to accounts that are more difficult to access.
For example, close all online bank accounts as this can add a few extra days to the time it takes to transfer your money, which may give you the cooling off period you need before you make an impulse purchase.
17 – Build A Support Network
It helps to have friends that can support your financial choices. Although you likely will not spend a lot of time talking about your financial situation with them, it is good to have friends that like to hunt for deals or that encourage you to save money when needed. Some friends may want you to constantly spend money while others are more supportive of you reach your targets. Building a good financial support network can help you reach your goals more effectively.
18 – Check Your Credit Score Report Regularly
You should check your credit reports regularly to prevent identity theft. If you look at one report every four months, you should be able to regularly monitor your credit report. This can help you catch identity theft much more quickly and protect your credit score, and most of these are free now anyway.
19 – Give Back
It is important to give back in some way. This may mean making charitable donations to the causes that you support. Another option is to volunteer for a local organization.
20 – Find A Work/Life Balance
Finally, it is important to find the balance between work, saving, and enjoying your life. Take time to relax regularly. It is OK to treat yourself occasionally, but just make sure that you are saving enough of your income to be comfortable. This is a difficult skill to develop, but essential if you want to be financially successful.
Do you need help in setting up a Financial Plan? Let me know…….
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