The twenties is an identification decade of your future adulthood. While being in your twenties you decide upon the career path, views on family life and form money habits. Not only the life's defining moments (like marriage) are happening in your twenties. There is also the wage's growth period that may happen in the first decade of the career which is exactly in your twenties. So, from a financial viewpoint, the twenties is the fundamental period when you acquire money habits for life.
In order not to live from paycheck to paycheck, you should create a healthy monthly budget. Here are the main steps to do so.
This is a number one priority for people of all ages as no following steps matter without having a timely paycheck.
While still being in college, acquire some marketable skills. These could be transferable skills to be applied at various jobs or the top-desired expertise that sells best these days.
The essential thing is not to find a job that pays. It is to focus on a lifetime career to support your financially through life.
If you learn to break down the paycheck into three original expenditure items, you'll never have an issue managing the budget. There are the "three envelopes" of your budget: the expenses on life essentials, financial priorities, and lifestyle choices. According to this scheme, 50% of your money goes to covering the bills, transportation, and food; 20% of your salary goes to paying off any existing debt and 30% of the paycheck goes on lifestyle choices.
Depending on what is going on in your life now, you'll be adjusting the monthly budget to it. You can decide to take a certification course and cut on entertainment expenses in its favor. You also need to stay realistic about your spending habits: not splurge on yet another designer piece if the credit card bill is weighing you down. Unsubscribe from Netflix, if you want to save money. Consider only reliable financial services, like Personal Money Service, to borrow money in case of the unexpected expenses.
Another "envelope to start putting away the money to is called the "financial umbrella". There are two basic saving categories to start with: emergency fund and personal savings. Some financially-aware people even start their retirement fund while being in their twenties.
20% of your paycheck should go into savings every month. Once you have accumulated the sum between three and six months of your net pay, you've got your emergency fund ready. Now you can start putting away some cash for your personal money goals.
Putting away every 20% of your paycheck into a savings fund may seem unrealistic. However, a good start is half the race, as they say. Keep the financial goal in mind, start a savings account and arrange the automatic monthly transfer onto it. Finally, adjust the budget to a new item in it.
Regardless of the age, everyone has two types of debt: good a bad. The good debt is your student loan, which implies a low-interest rate. Bad debt is your current credit card debt and has a higher interest rate.
Deal with the "bad debt" first and avoid exceeding the credit card limit in the future. Take care of the "good debt" as well while also putting away money into a savings account.
It's not uncommon for the people in their twenties to start a retirement fund. Aging and retirement are not that scary if you have the retirement fund plan figured out early. By starting off small and up-scaling your contributions to the retirement fund every five years, you're bound to have an unburdened life now and a well-off life in your sixties.
Credit history is your bank client value for life. Better make it good now and have financial freedom in the long run. To maintain a good credit score do the following:
Having quality software to remind you of your financial goals works perfectly in the fast-paced life. There is a plethora of financial apps to help you budget the monthly and even daily expenses. There are also the apps to help you reach financial goals faster by tracking your progress and the apps to calculate the interest rate of your first personal loans.
Besides sticking to the monthly budget, there are plenty of financial approaches that a twenty-year-old could use. Try out and pick those which work best for you. Just remember: the former generations' experience is your treasure trove, and your youth is your advantage to be open to more financial opportunities.