3 Smart Money Moves To Make In Your 20s

Every year, millions of young adults from around the world head off to college and after a few years they graduate. After graduating, they head out into the world looking for employment in an upcoming start-up or a well established organization. Others take a leap of faith and join hands with a few college mates to form a start-up or business.

The reason for doing so is to earn an income and secure their financial future. Few of these start ups ever become successful and those that do, only the founder or co-founders are secured financially. What about the rest? Having a job regardless of how well paying it is does not equal to a secure financial future. What secures your financial future is smart money moves.

You may be earning $10,000 or even millions of dollars in a year but what you do with your money dictates your financial future. You need to think out of the box and look for ways that allow your money to work for you.

Many young people dream of owning the fastest car, the biggest house, a private jet and other luxuries forgetting that money gets depleted the more one spends it. Furthermore economies do fail which means inflation will lead to companies closing down resulting in mass retrenchment. If you are employed, your financial status will be in jeopardy because you have to sell of your luxury goods cheaply to survive.

Do you want to avoid this? Here are smart money moves you need to make in your 20s to secure your financial future.

Smart Move 1: Invest Aggressively

As said earlier it is quite tempting to start purchasing luxuries like sports cars, expensive electronics and others when you get a well paying job. It is not a bad thing to buy a few luxuries to reward yourself for attaining some goals and objectives in your life but an intelligent young person looks at the future more than the present.

If you were to invest aggressively right for retirement when you are young, your financial portfolio will boast of great assets with high returns. As a young person, it’s best not to start making investments you don’t understand. Okay you have come across investments like bonds, stock, ETFs and mutual funds but do you understand how they work?

It is wise to seek the help of a professional investor who is skilled, knowledgeable and experienced. Start with a family member or family friend who is well versed with investment before seeking the help of a professional who will charge you a fee.

Smart Move 2: Save An Emergency Fund

It is a common move by many young people to contact the bank of mom or dad when faced with a financial crisis. You expect your parents to bail you out every time you are faced with tough financial surprises. They can range from paying rent to settling dental bills. When you borrow from mom and dad, you always promise to pay back yet you fail to do so and you keep borrowing from time to time.

As time goes by, this will strain the relationship between you and your parents. This is not what you want. Even charging your credit card for such emergencies is not advisable. Not only will you be charged interest on your re-payments but failure to remit the payment will lower your credit score.

The smart thing to do is save for an emergency fund to cater for any surprises that come your way. Your emergency fund should be able to cover 6 months worth of expenses. You can stash the monies in an easy to access savings account. By providing yourself with a cash safety net, you set yourself on the path to financial independence.

Smart Move 3: Pay Off High Interest Debt

As said earlier, charging your credit card means repayment of the monies with interest. Failure to do so will not only increase the charges but it will lower your credit score. This is not what you want because a lower credit score will lock you out of many things like a bank loan or even renting a home. Did you know that having a credit card and not using it lowers your credit score? With this in mind, it is important to make wise purchases that can be repaid easily.

If you want to secure your financial freedom, start paying off high interest debts like your credit card. You don’t want to be locked out of financial opportunities like bank loans or mortgages which can help you to buy a home. The same sources can also help you to refurbish your home before selling it off for a profit. If you are employed or running a business, pay off high interest debts each month first.

Smart Move 4: Create a Budget That Fits Your Goals

In order to spend your money wisely, you need to budget. It is a common practice among employed people to blow their monthly salaries and wages before mid month. This means they will begin borrowing in order to survive for the rest of the month. If you are working at the office, you can put off some luxuries. Instead of eating out or ordering in, you can budget for groceries and do some shopping.

Thanks to technology, you can download apps that allow you to budget. When planning your budget, 50% of your income should go towards paying your rent, student loan payments, bills and groceries. 30% should be your spendable income while 20% goes to savings. Remember, not every city will work with the above budget so consider all options to ensure that you not only live a comfortable life (note comfortable not luxurious) but you get to secure your financial future too.

Final Thoughts

Planning for your financial future when in your 20s helps to secure it when you are retired. There are several smart money moves you can make and some of them include investing your money for retirement, saving for an emergency fund, paying off high interest debts and creating a budget that fits your goals. By making these moves, not only will you have money to spend in your everyday life but your money will get to work for you while you lower your debt level. Remember, it’s never too late to make smart money moves.