For most people in their twenties, the
idea of investing and saving seems like a lifetime away. Most people don’t
start thinking about saving or investing for future until they are well into
their 30s. It is important to realize that the choices you make in your 20s
play a critical role in your future financial security. Here are some tips that
will help you to build a solid foundation for the future.
Focus
on your career:
In your 20s, getting established in
your career and earning a regular income should top the list of your
priorities. This is the time to invest in yourself, to acquire and develop
those skills that will enhance your career and boost your earnings. You might
have good ideas about becoming an entraprenuer and getting rich, but the
discipline of earning regular income from a job and sticking to top it for a
time, will go a long way in preparing you for lasting financial security.
Take deliberate steps to improve your
understanding of money matters. There is a plethora of information in the
media, books, magazines, newspapers, seminars and the internet that will guide
you as you make decisions.
The first step in financial planning is
to identify your goals. Your short terms goals (under five years) might include
wedding, buying a car or taking a vacation. Your medium term goals (five to ten
years) may be to get a mortgage, whilst your long term goals may be to plan for
retirement.
Live
within your means:
It is very tempting when you first
start earning, and particularly when you have few financial responsibilities,
for you to spend excessively on clothes, accessories, mobile phone bills. All
these can be a serious drain on if not carefully considered . Look over your
income and monthly expenses. Create a budget so that you can see exactly where
your money is going and make adjustments where necessary.
Be
cautious about borrowing:
It is better to borrow for things that
have lasting value such as a home or an education rather than for consumables
such as gadgets and clothes. Give yourself a deadline by which time you would
have paid off or at least the most expensive debt, usually credit card or store
card debt. Pay your bills on time so that you can build a solid credit history
from now. This will be important when you need to borrow more significantly in
the future.
Pay
yourself first:
Once your debt is under control,
automate your saving. Even if money is
tight, try to have at least 10 percent of your monthly salary transferred to
savings or a mutual fund account through a direct debit. Start small; you will
be surprised how quickly this builds up.
In your 20s, you have the luxury of
time. Even where you make mistakes, there is time to recover as your investment
earnings grow over several years; this means that if you are consistent and
disciplined, your savings will be able to grow significantly. Remember too,
that this is the time to travel, pick up new skills, and have new experiences
before you have larger responsibilities to take care of. Time is on your side;
so enjoy it.
Start
investing to meet your goals:
Historically, the stock market has
out-performed other forms of investments over the long term, but it comes with
some risks. If you don’t own any stocks, the market continues to present an
opportunity to purchase attractive stocks at decent prices. If you don’t have
the time or expertise to select stocks and you have only a small sum of money
to invest each month, a stock market mutual fund may be the ideal investment to
meet your medium and long-term goals.
It may seem odd to talk about
retirement when you have barely got started with work; naturally you are more concerned
about your job and not the end of your working life which is decades away. As
soon as you start work, you will be eligible to contribute to a Retirement
Savings Account (RSA) through your Pension Fund Administrator (PFA). You have
an edge if you start to invest regularly for retirement from now, and you have
a better chance of building a significant nest egg with relatively little
effort.
Accommodation is often a challenge.
Even if you are fortunate enough to have a free roof over your head provided by
your parents or other family members and friends, you can contribute to family expenses
on items like utility bills. You can also set aside some of the money that you
would have had to use for rent to build up equity towards getting a mortgage so
that you can own your own home.
Earn
your independence:
It is the desire of every parent to
ease the path of their children and most children will embrace this gladly.
Whilst it’s nice to get a lot of help from your parents, don’t let it get in
the way of your attaining financial success. Earn your independence and start
to take charge your financial life. Your parents provided you with an
education; now you are longer a child; your finances are your responsibility.
It is not how much you earn that
matters, it is how much you keep. The key to building a solid foundation for
future financial security is to have a budget, save, invest regularly and
control your debt. The choice you make now, will largely determine how your
life will be in the future.
I hope you make the right choices when it comes to your finances. Thanks for visiting.
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