For many people, their 20s are their golden years. Your list of responsibilities is short, your bucket list is long, and you’re free to live in the moment the majority of the time. While it is important to enjoy yourself and take advantage of spontaneous opportunities, your 20s are also a critical time for building smart financial habits that can put you ahead of the game by the time you reach your 30s.
In your 20s, you are happy justifying non-essential expenses with mantras like, “Life is short!” and “You only live once!” However, now that I’m almost 30, I’ve realized there are a few things I could have done to set myself up better for the next stage of my life.
Here are a few tips from an almost 30-something:
Don’t Waste Money on Things That Don’t Add Value to Your Life
In your 20s, you’re more in tune with the present moment. This is probably because you’re constantly plugged into social media and being targeted and re-targeted by companies that want you to open your wallet. Due to this constant exposure, our generation is more aware than ever of what we don’t have, often comparing ourselves to others without even noticing it. Take this advice: Observe but don’t react. Instead, re-focus on your own goals and everything you already have. (For related reading, see: 5 Ways to Control Emotional Spending.)
Start Building Your Credit
It’s never too early to start using that shiny piece of plastic to your advantage. Just make sure you spend well below what you’re able to pay off at the end of the month. Most importantly, don’t carry a balance for too long or let any bills go unpaid. Interest rates on short-term debt like credit cards are generally sky-high, and you don’t want to be left owing more than you spent. In the same vein, failure to pay your debts in a timely manner in your 20s can hurt you well into your 30s when you’re really going to want good credit to ease big purchases like a new car or your dream house.
Live Within Your Means
This may seem obvious, but it’s a lot harder than it sounds when you’re in your 20s. You want to have fun, but it’s not always a good strategy to, “Fake it ‘til you make it.” Keeping your monthly overhead low and only buying what you can afford will help you build your credit and make large purchases easier as you build your wealth. Save some of that cash in your 20s; you may feel poor compared to other members of your family and some of your older friends, but you’re richer than you think. Can you give up one $7.00 latte a week? Find a cheaper cell phone plan? Live with a roommate or two? In your 20s, you are more likely to have the power to control where each of your dollars goes. Putting a mere $100 away each month in an investment account now will help you leverage the power of compounding into your 30s, 40s and 50s.
Be Careful How You Spend Borrowed Money
Whether it’s a federal student loan or a loan from a family member, don’t spend it frivolously. If you don’t need all of it, don’t spend it all. You will have to pay it back one day.
Take your time, live in the moment and enjoy yourself, but don't forget to think ahead to where you want to be in the future. What kind of financial decisions do you need to make now so you can accomplish what you want later? You won't regret it in your next stage of life. (For related reading, see: Enjoy Life Now and Still Save for Later.)
Source: Use These Tips in Your 20s to Get Ahead Financially
