For many 20 year old’s, financial planning and management are at the bottom of their to-do lists. All the same, the sooner young adults start properly managing their finances, the sooner they will achieve success in their lives and careers. The ensuing three strategies will help people in their 20’s take steps in the right financial direction.
Develop Core Competencies and Marketable Skill
Financial stability and success is earned through hard work at school and at work. Before anyone can worry about financial planning, they first need to have a steady income. The foundation of a successful career starts with academic work, whether it is a few community college classes or the completion of an MBA program. During this time, young adults should think about their overall career plan and not just focus on taking whatever jobs are available. Additionally, getting a degree in business actually provides limited career direction without having a plan to develop marketable skills. Thus, young adults should focus on taking advantage of their first few jobs to explore different industries and position. Almost every will dislike one of the first few jobs they do, but this will provide valuable work and life experiences. In the ending, having a core competency of marketable skills will enable the young adult to easily work in any field. That is, career stability means financial stability.
Almost anyone in their 20’s has some kind of debt, whether it is student loans or credit cards. Nevertheless, financial freedom cannot coexist with cumbersome debts. This is problematic for many people because they mistakenly assume that delaying debt repayment until they can make more money will actually work. However, this strategy not only doesn’t work, but it often backfires with unpleasant financial consequences. This is because as people make more, they tend to spend more. For example, as they grow older, rent turns into house payments and car loans can turn into boat payments. Therefore, now is the time to break the debt cycle through proper budgeting and financial planning. If necessary, young adults should establish a debt-repayment plan or consider consolidating their debts into a single financial program. This will help prevent a low credit score and major interest payments. Young adults should consider occasionally consulting with a financial professional.
Start an Emergency Savings
It makes sense to pay off debts instead of putting money in a savings account. However, it’s also important to have a small, untouchable emergency savings fund. Ideally, this could be in the form of a small monthly direct deposit into a high-yield savings account. Although there will be many times when people will feel they are having an emergency, these funds should only be used in extreme circumstances. Afterwards, the money should be immediately paid back. One of the benefits of having a small emergency savings fund isn’t just the money, but it’s the self-control and delayed gratification skills that people will learn. Consider maintaining at least double or triple your monthly salary amount in an emergency fund.
Looking back, the foundation of financial freedom begins in the 20’s when young adults can make the right career, personal and financial decisions. Having marketable skills, eliminating debt and having a small emergency fund are all steps in the right financial direction.