Think that smart financial habits begin when you land the corner office? Not true! In fact, learning financial fundamentals early can help ensure we can take smart risks and are well-established as we grow our careers. While these are good reminders at any point in our lives, time is money! If we master these habits in our 20s, they have a lifetime to pay off.
Develop A Budget You Can Live With
One of the most important financial habits we can establish is budgeting. It is core to almost every other financial skill, and getting this right will help all our other goals fall into place. Our 20s is a great time to try out different styles and budgeting tools. Are you a cash envelope or an app gal? Find out now what works for your life so that budgeting becomes second nature!
Start Saving For Retirement
Thanks to the time value of money, even saving a little today translates to big gains in savings goals down the road! As soon as you start that first job, become educated on your options for retirement savings through your employer. As a first step, make it your goal to save enough through that plan to max out whatever matching contributions they’ll make to your own savings. Self-employed? Read up on other retirement savings products and find a fit for your own financial goals.
Develop a Side Hustle
The smallest of side hustles can add up to unique skillsets and major resume enhancers over time. Our 20s is a great time to experiment with part time work and freelancing opportunities. These may not always translate to your primary career objectives, but can give you a great window to explore personal passions as well as experiences that compliment your primary career.
Become Financially Literate
Understanding finance can seem intimidating. Couple that with most of us feeling like we don’t need financial literacy until we make big money, and we’re often left deferring financial literacy until much later in our lives. Take small steps now to become comfortable with all aspects of finance. Tune in to a weekly podcast or brush up on the business section of your favorite periodical to make the topic manageable.
Learn to Monetize Your Talent
Our skills, talents, and experiences are the primary drivers of our financial potential over our lives. Early in our careers is a great time to experiment with developing talents that we’re not sure how to monetize. For example, if you love writing but a major paper’s staff position seems like a stretch, start making unpaid contributions to a local paper, your church newsletter, or a new small business in your community. Over time that portfolio of work builds up to an impressive portfolio that can be sold to bigger clients!
Use Credit Wisely
Smart credit usage in your early 20s ensures that you can finance major purchases like a home or car down the road. Most of us start building that credit with small balance credit cards, so be sure to couple any credit spending with a structured plan to pay it down. It’s nearly impossible to get started in life without some debt. At this point, don’t get terribly hung up on being entirely debt free, and focus on slowly and deliberately building credit history.
Invest in Quality
Our 20s is a good time to start making smart choices about where to save and where to invest in quality “assets” that can be smarter purchases over the long run. For example, trying to decide between the Ikea mattress or something a little more luxe? If you’re able to save up a bit and wait, purchases like these can be ones to start thinking about investing in. This prioritization will be different for everyone, but here are some ideas for where to save and where it makes sense to invest.
Practice Living Below Your Means
Get in the habit now of spending way less than you earn. Lifestyle creep can sneak up on the best of us. Every hard-earned raise early on in your career can feel like (and is!) an awesome accomplishment. Instead of running out to treat yourself with the entirety of your new found fortunes, think about splitting the goods with your current self and future self. Did you get a 3% raise this year? Go you! Send 1.5% percent of that straight to your retirement savings before the change hits your paycheck. You won’t miss it and you’ll still have some fun money for celebrating your hard work.
Get Smart About Insurance
Insurance planning can be tricky in our early years. Too little can leave us with unnecessary expenses in emergencies and too much can feel like a waste of your hard-earned cash. An important rule for insurance in our 20s is to truly take the time to review what you need for your personal situation. Many of us just end up cribbing off of whatever company, plan, or broker our parents used, and that may not fit our life stage. Meet with a professional to be sure you have the basics covered in health, car, and homeowner’s or renter’s insurance.
