5 Smart Financial Decisions to Make in Your 20s
April 14, 2016 Francine Jones 0 Comments
It’s easier to make smart financial decisions in your life when you have a solid foundation. In many cases, the earlier you get started on a financial goal, the easier it is to make good long-term financial decisions. Your 20s are the perfect time to start making good financial decisions, and here are five smart ones to make.
Start saving for retirement
Most people start their careers in their 20s and get their first access to retirement programs then. In fact, most 401(k) plans don’t let people start contributing before they hit age 21. You should get into a work-related retirement account as soon as you are eligible and contribute at least the minimum necessary to get any company matching funds that are available. The advantage of starting to save for retirement in your 20s is that you have more time to allow your investments to grow.
Start an emergency fund
Your 20s are also the perfect time to start saving outside of a retirement fund as well because you have fewer things competing for your money. You typically want to shoot for saving at least three months of expenses, but six months is a better target. You can help reach this goal by having money automatically deducted from your check or your checking account and sent straight to savings every month.
Keep your debt to a minimum
When you are young and single with few responsibilities, it can be tempting to make a lot of big purchases and worry about paying them off later. But the smart thing to do when you are in your 20s is to keep new debt to a minimum and work to pay down debt you may have accumulated in college, such as credit card debt and student loans. That will make your financial life easier when you want to get married, buy a house and start a family.
Don’t go without insurance
When you are young and have few cares in the world it can be easy to think that nothing will ever go wrong, but you should protect yourself against the unknown by getting insurance. You should have renter’s insurance, health insurance and auto insurance if you drive. Though you may not have a true need for life insurance, you can get much lower rates on a policy by getting it in your 20s rather than waiting until you are older.
Follow a budget
It’s hard to do all of the things already mentioned if you don’t have a good handle on how much of your pay gets spent on necessities and extras. Figuring out and then sticking to a budget makes it much easier to save and pay off debt.