Your 20s financial habits can be incredibly powerful.
Not only can you build life-long positive financial habits, but also take advantage of compounding through investing. Here are 8 tips that everyone in their 20s should know!
1. Develop a valuable skill (that makes you money!)
This is one of the most important things to set yourself up for life. Get really, really good at something that people will pay for. This will ensure that you will always be able to find work, get paid highly for working relatively lower hours and always be in demand. Some of the most in-demand skills right now are:
- Digital Marketing (this is what I’ve gone with!)
- AI (Artificial Intelligence)
- Analytical Reasoning
- UX Design
- Cloud Computing
- Business Analysis
2. Develop specific financial goals
If you haven’t sat down and figured out what your financial goals are, I highly recommend you do so. Why? 14% who have goals are 10 times more successful than those without!
Your goals don’t have to be super specific, just knowing that you’d like a car within the next year is good enough. I’d also urge you to think about what is important to you personally and not just follow in your parents or peers footsteps. For example, if you really have no interest in buying a house – then, don’t!
3. Don’t blow all your savings on travelling
Just to clarify, I am not saying don’t travel! Travel is a valuable experience and I think it’s well worth the money. However, do not spend all of it on travelling.
Throughout uni, I met so many young people who had $30,000 – $50,000 in savings that they worked years for – just to blow every cent on travel. If you’re thinking of doing the same, I urge you to put 10% of these funds aside either in long-term savings or to invest. That $5,000 you invest in the stock market at 20 will be worth $50,000 by the time you’re 50, even if you invested nothing after that.
4. Learn how to cook
Cooking at home not only helps your finances, but is also an important life skill!
It can help cut down work lunches in the form of meal prepping and avoids those lazy delivery food purchases. You don’t need to be a chef – just learn 5 or so easy and delicious recipes.
Tip: Not sure what you can make with your random ingredients? Use Supercook! You can input everything in your kitchen on the website, and it spits out recipes that you can make! It is a fun way to try something new without having to buy extra groceries.
5. Buy a second hand vehicle (if possible)
Most new cars are horrible financial decisions – especially for young people.
When buying your first car, I urge you to buy something suitable, reliable and second hand. Try to save up for it in cash and avoid getting a car loan if possible. A vehicle can be a money pit that is really hard to recover from, so be careful. I have written an entire article on this topic, so be sure to check out the link below.
6. Know your worth
In the workplace, know what your market value is.
We’re all worth something. Person A might be worth $110/hour, Person B might be worth $22/hour. Find out your value. How much should you be getting paid? Ensure that you are getting paid a fair amount and negotiate at interviews and workplace reviews.
Too many exceptional and skilled young people are underpaid and overworked simply because they do not know their worth. And, if they do – they are not willing to fight for it. To create financial success, only accept what you believe is a fair pay. Time is just as important as money and do not waste your time on a company that will not pay you fairly.
Tip: You can check the average salary for an industry using Payscale.com
7. Start budgeting
Start budgeting in some capacity.
You don’t need a meticulous excel spreadsheet or have to track every cent. Just have a good idea of your income and expenses. Know how much you are spending on what category, and know when you need to stop. The below article goes into budgeting in a lot more detail.
8. Become knowledgeable about investing
Although this is the last point on the list, it is one of the most powerful.
Your 20s are the most powerful time to start investing – do not think of it is as something “adult” that you’re going to put off until your 30s and 40s. When you invest money for decades, you take advantage of compounding. If you started investing at 40, you’d have to invest eight times as much to have a similar portfolio value. Let me show you.
- Starts investing at 20
- Starts with $5,000
- Contributes $100 a week
- Portfolio at 50 years old: $705,201
- Made profit of $544,201
- Starts investing at 40
- Starts with $20,000
- Contributes $825 a week
- Portfolio at 50 years old: $700,946
- Made profit of $251,946