They say that your 20s are the best years of your life. It’s during this phase that it’s best to grab every opportunity that comes along the way – further studies, travelling abroad, starting your own business – even if it means spending a good chunk of money from your paycheck. Though there’s nothing wrong with this idea, this is not an excuse to be irresponsible with your money. The spending habits you develop now will be the foundation of your financial future. Trust us, you don’t want to live fast and die poor.
There are a lot of things they don’t teach you at school and properly managing your finances is one of them. Saving money might not be at the top of your priorities right now, but it’s a key step into achieving your goals in the future, like buying your own condo unit or earning your first million. Attain those goals by smartly managing your finances through these easy steps.
Pay yourself first. Naturally, the minute you get your salary, you set aside money for rent, bills, groceries, or even entertainment. But instead of saving what is left, why not put your savings account first? The general rule of thumb is to set aside at least 10% of your income for your personal savings, wherein 5% will be used for your future dreams, and the other half for emergencies. This way, you’ll be able to take care of your future self as well.
Don’t use your credit card to buy things you can’t afford. Credit cards might seem like a lifesaver, providing you with means to purchase things if you’re a bit short on money – that is, until you see the bill. Unless you’re absolutely sure that you can afford paying the monthly dues on time (credit card companies earn more from late payments due to more interest) then it’s best not to use them at all, especially on things you don’t need.
Don’t splurge on flashy things. Speaking of things you don’t need, ask yourself this: do you really need to spend your paycheck on that ridiculously expensive gadget or set of clothes? There’s nothing wrong with rewarding yourself every now and then, but if you’re living paycheck to paycheck and you’re buying these things simply to impress everyone, a word of advice: don’t.
Motivate yourself. What do you see yourself doing in the next few years? Do you still see yourself living with your parents, or do you plan on moving into your own home by 25? Enumerate your life goals in your journal, be it buying a car or travelling the world, along with how much you’re likely to spend for each. This way, you can easily track your progress, if you’re setting aside enough money for every goal. To further motivate yourself, why not cut out pictures and paste them on a cardboard display as a reminder?
Start investing early. If you start investing as early as your 20s, you have time on your side, meaning you stand to earn more the longer you keep your investments. With modern technology and the Internet, you have more tools at your disposal to learn about investments. You can also work with financial advisors to learn about opportunities and you can create an investment approach based on your needs and interests.
If you keep these tips at heart, then you’re on your way to effectively managing your finances and achieving your dreams for the future in less time.