Your 20’s is probably the most exciting time of your life. As you transition into adulthood, you get to try out several things you’ve only dreamed of as a kid – thanks to your new-found freedom. You also get to explore the world, make mistakes, and grow as a person.
Unfortunately, there are several money lessons most young adults don’t just get till they turn 30. And who can blame them? Even after spending 16 years in school, the education they’ve received taught them little about finances. And unless you’re from a financially-inclined family, you simply have to figure out these things on your own.
But when it comes to figuring out your financial life, the earlier, the better. That’s why we’ll explore financial lessons that will put you way ahead of your colleagues.
Learn how to manage money
Up until your 20’s, you’ve probably had your parents cover most of your bills. All you had to focus on, for the most part, was your education. Consequently, you’re inept when it comes to money matters. As you know, you cannot make the right decisions without the right knowledge!
Unfortunately, many young people think they can just magically make great financial decisions. It’s similar to having a strong desire to play the guitar without learning how to play. You simply cannot play!
That’s why it’s important to get financially educated as soon as possible. Read about saving, investments, and money-related matters. If possible, take courses on the subject. Having a strong foundation knowledge-wise will help you avoid several regrettable mistakes.
Time is money
You’ve probably heard this before. Nowhere else is this borne out more than when it comes to compound interest. Let’s explore a practical example.
Imagine you start saving $100 per month from the time you’re 20 until you retire at age 65. At an average return of 8%, your principal and interest would have accrued to $536,000 by the time you retire. Now, if we hold all factors constant except that you started saving at 30, you’ll have only $233,000 upon retirement. A 10-year delay cost you $303,000, even though you saved faithfully for 35 years. Start investing early!
Update your childhood goals
You know how we all had ambitious dreams as kids. Maybe you wanted to live in a mansion, buy flashy cars, or travel around the world. But as you come of age, you realize that all of this costs money – lots of money.
Unfortunately, many people set these unrealistic goals as the measure of success in their life. While it’s good to have ambitious goals, they must be realistic. But more importantly, they mustn’t force you to live beyond your means.
Look, you made those goals when you knew so little. Update them to the current reality, so they don’t hold you back in life.
Take Positive Risks
There’s no better time to take risks in adulthood than in your 20’s. Maybe you have an important business idea that you’re passionate about, go for it. Maybe you want to tour the world while working as a freelancer, take a shot at it! Maybe you want to switch careers, have a go at it!
If it pays off, you will be happy. If it doesn’t work out, you might be unhappy, but you know you went for it. And you’d be wiser for it. But if you do not take risks, you may live the rest of your life in regrets.
Know this: It’s harder to take risks as you get older. You have to take care of your kids, family, and you probably have a mortgage over your head. Your failure then would have a more devastating impact. Now is the time to take risks to bring your dreams to reality.
Avoid silly debts – Instead, save!!!
It’s surprising the amount of avoidable debt young people rack up. It’s high time you sat down and analyzed your spending habits. How much do you spend on food? Expensive gadgets and clothing? And more? Create a new spending budget and stick with it! You’d be surprised by how much you have left. Put part of the money you have left into an emergency fund. You should also put a part of it in your retirement fund.
If your credit card is too much of a temptation, know that you do not need it. You can set a rule for yourself not to purchase anything you cannot afford with cash.
There’s no magical formula for saving. You simply have to live within your means. Do not take out a mortgage or auto loan you cannot afford.
We are here to help guide you through the labyrinth of personal finance and money management. We understand the complexities can surmount to levels unheard of for an individual. Let us clear the noise for you. Contact us today for more information or to speak with one of our advisors. Let’s get you on the path to financial freedom!