In your twenties, you form habits that will last the rest of your life. This is the time in your life when you might start a career, get married, or perhaps start a family. In your twenties, you should focus on achieving these five specific financial goals.
Build an emergency fund
An emergency fund is a set of funds set aside for unanticipated costs. When life throws you a surprise, the fund works as a financial insurance policy. In your twenties, the amount you save will be dictated by the stability of your work, your income, and any debts you may have. Your ultimate goal should be to save three to six months’ worth of living expenses in an emergency fund.
Make your down payment a savings goal
Your mortgage payments will be reduced if you make a higher down payment. A respectable down payment can also help you avoid having to pay for private mortgage insurance. You will be in a better position to buy a house when you are ready if you start saving early, no matter how far in the future a house purchase may appear. The down payment is normally at least 20% of the total buying price.
Contribute to your retirement
Starting to save for retirement as soon as you acquire your first job is ideal. Aim to contribute 15% of your annual income to a retirement savings plan. Refer to retirement savings benchmarks to stay on track with your retirement plans. For example, at the age of 30, a traditional retirement benchmark states that you should have the equivalent of a year’s pay in retirement.
Get out of debt
You might not be able to pay off all of your college loans by the age of 30. To get out of debt, make a debt payment plan right away. You should also make an effort to repay any credit card debt you may have. When you handle your debt successfully, you may be able to take additional steps forward in your life.
Consider investing money you would have put into a low-interest savings or money market account if you want to create wealth outside of your retirement funds. Compound interest will accelerate the growth of your invested funds, and the sooner you begin, the better. Expanding your portfolio is essential for effective investing. You can achieve this by diversifying your investments across different industries and keeping a range of assets (stocks, bonds, and cash, for example). Because of the nature of investing, you should only invest money that you are willing to lose.
Establish the habit of saving money
Spending less money every day is an important aim to set for yourself in your twenties. Frugality allows you to spend more money on the things that are most essential to you right now. Look for methods to cut back on larger recurrent expenses so you can put more money toward your savings and investment goals. You also don’t have to deprive yourself in order to do so.