If you are in your 20s, time is on your side. But that does not mean you should put off planning your finances for a few more years. The earlier you start developing good habits, the better off you will be when you are older and have a lot more financial responsibilities. If you are smart with your money in your 20s, I guarantee that you will thank yourself one day! The years will fly by and you will regret not being more organised when you were younger. We know that people are at different stages of life at different ages, but we hope that most or at least some of these tips can help you get on the right track! Here are 5 financial habits you can apply straight away in your 20s.
1. Make a Personal Budget
The first step is to manage what you already have more efficiently. Keep track of your monthly income and expenses. Stop making unnecessary purchases that you can’t afford! If you say you are broke and pay €5 for a coffee multiple times per week, take a good long look in the mirror! If you are living pay-day to pay-day at the moment, you’d be surprised how much extra money you will have if you only make essential purchases. You can then set aside money for luxuries like going out for dinner or drinks (post covid restrictions). You will appreciate it more and there will be no guilt involved.
2. Make Saving a Habit
Sounds simple right? Savings are one of the most important parts of a solid financial plan. Whether it is saving for a mortgage, a car, or even just for a holiday, you need a plan. Make it a habit and increase how much you save as time goes on. Do not take out unnecessary loans!!! If you already have loans to pay off, set up a plan to do so as efficiently as possible. If you have more money than the average person in their 20s or you received an inheritance, you should probably set up a Savings & Investments account so you can get a return on your money! Leaving a lot of money sitting in the bank or credit union can lose you money in the long run.
3. Learn As Much As Possible About Investing
Do your own research and learn as much as you can. Whether it’s setting up a savings & investments account, investing in stocks or funds, or investing in a pension scheme, don’t do it blindly! Know why you are investing and how much you can afford to invest. If you can, invest at higher risk! You can get away with this in your 20s when you have less responsibility. You can also invest in yourself by learning new skills for your career. Talk to a financial advisor if you need to. It could benefit you hugely in the long run.
4. Start a Pension
I know what you’re thinking, it’s way too early for that. But if you’re in your mid to late 20s, starting a pension could go a long way for your future. If your employer offers to match your contributions, take it because it is free money. You can earn up to 40% tax relief on pension contributions. If you want to retire early, you better start saving into your pension pot. Just know that the state pension is probably not sufficient to replace your income in retirement. There is also no guarantee that there will even be a state pension by the time you reach retirement!
5. Reward Yourself
I know this sounds like it contradicts the previous 4 tips, but if you have applied those tips already then you deserve to spend money on yourself as a reward! Your 20s should be some of the most exciting times of your life! For many of you, it’s the first time where you have your own money and added responsibility. In your 30s, a lot will change. You may be married with a family and have a mortgage to pay off. You could be further along in your career and have a lot less free time. You will probably have a lot less freedom in general! Travel as much as you can and tick off the rest of your bucket list. Whatever it is you want to do, do it if you can afford it. Be smart and be organised and you will get a lot more out of your money.
If you would like to discuss further, please call us on 025-30588 or book a complimentary chat here. We are always happy to help whether it is in our office, via zoom or over the phone.