While some people may believe that 20-year-olds should not be thinking about financial goals, the truth is that it is never too early to start planning for the future. By setting financial goals at a young age, 20-year-olds can take advantage of the power of compound interest and make their money work for them.
Additionally, establishing financial goals can help to keep spending in check and prevent debt from spiraling out of control.
Perhaps most importantly, having financial goals gives 20-year-olds a sense of purpose and direction. Rather than simply living for the moment, they can start working towards a better future. So, while it may seem daunting, setting financial goals is one of the smartest things 20-year-olds can do.
Here are five financial goals every 20-year-old should have:
- Establish an emergency fund. An emergency fund will help you cover unexpected expenses, like a car repair or medical bill, without going into debt.
- Establishing an emergency fund should be one of your top priorities if you’re a 20-year-old just starting out in the world. After all, you never suddenly know when you might need to pay for a car repair or a medical bill.
- The good news is that it’s not as difficult as you might think to start saving up for an emergency fund. Here are a few tips to get you started:
- First, figure out how much money you’ll need to cover your basic living expenses for at least three months. That includes things like rent, food, utilities, and transportation. That’s a good goal for how much you should have in your emergency fund.
- Make cutting back on unnecessary expenses a priority. Take a close look at your spending habits and see where you can cut back, even by just a little bit. Every dollar you save can go towards your emergency fund.
- Automate your savings so you don’t have to think about it monthly. Many banks and investment firms offer automatic transfer services that make it easy to set aside money each month without remembering to do it yourself.
- By following these simple tips, you can start building up your emergency fund so that you’re prepared for whatever life throws your way.
- Save for retirement. It may seem like a long way off, but the sooner you start saving for retirement, the better. Even if you can only afford to save a little bit each month, it will add up over time.
- First, take advantage of any employer match programs. Many companies will match a certain percentage of employee contributions to a retirement savings plan, so it’s essentially free money.
- Second, start automating your contributions. Set up a recurring transfer from your checking account to your retirement account so that you’re automatically saving regularly.
- And finally, invest in a diversified mix of assets, including stocks, bonds, and cash, to balance risk and potential return. By following these simple steps, you can get on the path to a comfortable retirement.
- Pay off your student loans. If you have student loans, make paying them off a priority. The sooner you can get rid of your debt, the better.
- Student loans can be a major burden, both financially and emotionally. If you’re struggling to make your monthly payments, it can feel like you’ll never get out of debt.
- However, it’s important to remember that you’re not alone. In fact, according to the latest figures from the Federal Reserve, the average 20-year-old owes more than $37,000 in student loans.
- So, what can you do to get your student loan debt under control? First, it’s important to understand all of your options.
- Several different repayment plans are available, so you’ll need to find the one that best fits your needs and budget.
- You should also consider consolidation or refinancing your loans to get a lower interest rate. And finally, don’t be afraid to ask for help from a financial advisor or debt counseling service.
- Build up your credit score. Your credit score is essential for things like getting a loan or renting an apartment, so it’s worth improving.
- As a 20-year-old, you may not have established much of a credit history yet. And if you have, it might not be perfect. Fortunately, you can do a few things to start building up your credit score.
- One of the best things you can do is to ensure you constantly pay your bills on time.
- That includes not only credit card bills but also utilities and rent. Another way to build up your credit score is to use a credit card responsibly. That means charging only what you can afford to pay off each month and keeping your balance low.
- You can also help your credit score by maintaining various credit accounts, such as revolving and installment loans. By taking these steps, you can build up your credit score and establish yourself as a responsible borrower.
Create a budget and stick to it. Knowing where your money is going is essential to successful money management. Figure out how much you need to spend each month on essentials like rent and groceries, and then make sure you don’t overspend in other areas.
- 20-year-olds have a lot of expenses. They may pay for school, their first apartment, car insurance, etc. It can be tough to stay on top of everything and still have money left over for fun.
- Creating a budget is a great way to get a handle on spending. Here are some tips for creating a budget as a 20-year-old:
- Know your income. That includes money from your job, parents, scholarships, and other sources.
- Track your spending. For a month or two, write down everything you spend money on, from rent to coffee to nights out with friends. That will help you see where your money goes and where you can cut back.
- Set realistic goals. Don’t try to save every penny – allow yourself some wiggle room in your budget for entertainment and going out to eat. But be realistic about what you can afford and stick to it.
- Put it in writing. Make a budget plan and put it somewhere you’ll see it often, like on your fridge or mirror. That will help keep you accountable and on track.
- Review regularly and adjust as needed. Things change – your income may go up or down, and you may get a new apartment, so it’s important to review your budget regularly and make adjustments as needed.
- Following these tips will help you create a budget that works for you and lets you stay on track with your finances – giving you one less thing to worry about as a 20-year-old!
Twenty-year-olds who begin planning their financial futures at a young age can take advantage of the power of compound interest and put their money to work for them by establishing financial goals at an early age.
Putting together a plan for your finances and sticking to it can help keep your spending under control and stop your debt from getting out of hand. If you have outstanding student debt, you should make paying it back a top priority.
By adhering to these guidelines, you can construct a budget that meets your needs and ensures that you do not stray from your spending plan. That will be one less thing for you to worry about as a young adult.
