Six Money Essentials If You’re In Your 20s
Your 20s is an expensive stage of life. There will be many big spend items that will be coming in at any one time. Student loans kick in, you may be looking to buy your first apartment or home (and furnish it!), perhaps there’s a wedding on the horizon, and maybe even Children. There’s a lot to pay for in what seems to be a short amount of time. Even though you feel young (and you are!), it’s time to start putting together a financial plan. The best place to start is to decide that you are going to eliminate as much debt as possible.
Remember, getting out of debt now will set you up for a more secure future. It’s always a good idea to start today in anticipation for tomorrow. Your financial plan doesn’t need to be overly complicated and should take the shape of a simple, straight forward series of targets that will help you reach your financial goals. To set yourself up for optimal success, be sure to include these six essentials in your plan:
1. Eliminate Debt
The best thing that you can do for yourself in your 20s is to put together a viable “get out of debt” action plan. Make a list of all your debts from smallest to largest. This includes any and all credit card and college debt. Don’t deal with the small ones first, but those with the highest rate of interest that is being charged, in order to see real progress. Then assault them one by one, smallest first, until they’re gone.
2. Understand How Your Career Impacts Your Investing
Look at your career as you would a share or a stock investment. One path could be highly risky with high rewards. The other path could be safer, more predictable, and more stable. This should affect how you approach your investments. Make your investment risk the opposite of your career risk. Big earning, hit or miss type careers like commercial real estate warrant very conservative investments. Middle school teachers or nurses should look at their job and salary as safe and steady, increasing the amount of risk they take in their investment portfolio.
3. Start Saving For Your Emergency Fund
As you pay off your debt, you will also want to make sure that you’re saving for an emergency fund. The goal is to have three to six months’ of easily accessible money to cover all of life’s expenses in the event of a catastrophic event like a job loss. An emergency fund is critical so that you don’t have to dip into other savings or withdraw funds from your investments. Plus, your emergency fund will help you sleep better at night.
4. Start Investing In Your Future
It’s never too early to start investing and saving. Once you have your emergency fund on autopilot, then you can start contributing to your Pension. Even if you can’t make a large contribution, remember the “miracle” of compounding and that your money will grow over time.
Begin with contributions to your Pension at about 10% of your gross income. Think of it as if your employer gives you a 10% pay cut or fires you if you don’t like it. The difference is that you will be investing in yourself, and everyone can manage on 90% of what they make now, and as a wise man once said “pay yourself first”! Remember, this is free money to you, so take advantage of it!
5. Remember The Four Keys Of Investing: Diversify, Asset Allocation, Keep Fees Low, And Taxes Low
An efficient way to do this is through the use of a qualified Independent Financial Adviser. This must be right because all rich people have one (unless they have inherited wealth) and survey after survey proves people with an IFA make more money than those that don’t.
6. Be Sure That You Have The Right Insurance
Insurance includes Medical, Life Insurance, and Critical Illness Benefit. These are all essentials to take care of right now, in your 20s. If you aren’t covered by your employer, speak with an IFA to help you navigate through your Insurance choices.
Remember: The more savings you have today, and the more sacrifices you make today to have cash reserves, the more you will be able to capitalise on opportunities in the future. A small sacrifice today leads to a large reward tomorrow!
Are you in your 20s? Hire an Adviser today – they will be worth their weight in gold………….
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