So you have enjoyed your youth, graduated with a degree or earned a professional designation, and landed your first real job. Now it is time to grow up, knuckle down and make something of your life. It is a sad fact that many people do not start saving for their retirement until they are in their early 40s, and many people are barely able to stay ahead of their bills well into their 30s.
This lack of financial planning represents an enormous waste of precious resources, and a ton of headaches and indigestion that can easily be avoided with a little forward-thinking and discipline.
Here are the 4 most important money moves that you can make in your 20s to set yourself up for a lifetime of success and financial security.
Get Your Debt in Order
We live in the age of debt. Starting out on your own with a load of debt is an inescapable reality for most young people these days. Fortunately, it does not mean that you need to stay shackled to your debt for the rest of your life.
Once you have a steady source of income, sit down and make a plan to tackle your debt quickly and efficiently. Start by paying down and eliminating any debts with high rates of interest.
Credit cards and car loans are examples of debts that will eat into every paycheck and keep you from getting ahead on your finances. Pay these debts down or refinance them with another loan at a much lower rate of interest. You should have a plan for being free from all your uncollateralized debts (mortgages and business loans are fine, for example) within ten years of getting your first real job.
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Set a Strict Budget
Getting your spending under control will be the most difficult yet the most rewarding step to financial security. It is tempting and easy to live beyond your means well into your 40s, but you will need to pay for everything eventually. It is much better to learn how to spend within your means when you are young than it is to spend your golden years slaving away to pay off impulse purchases that you have long since forgotten about.
Create and follow a strict budget that will allow you to meet all your responsibilities, pay down your debts and start saving for your retirement.
Do not be afraid to set some money aside for fun and entertainment, just make sure that it is a reasonable amount and that you do not spend beyond it. If you want to buy something really great, then save up your discretionary funds instead of buying it using more debt. You will enjoy it that much more when you get it and you will save yourself the stress of financial instability.
Save for Emergencies
You will face a number of different financial emergencies in your life no matter how careful you are or how well you plan ahead. Always have a little bit tucked away somewhere that you can get to quickly and easily when you need some emergency funds.
When this emergency fund takes a hit, focus on topping it back up as soon as possible. Being able to quickly write a check in an emergency will end up saving you a lot of money by solving problems early and avoiding accumulating expensive debts borrowed at emergency rates.
Save Aggressively for Your Retirement
Once you have your regular finances in order, it is time to start saving for your retirement. The key to retiring comfortably and early is to get started on your savings as soon as possible. Saving for your retirement means more than just keeping a large balance in your bank account; it means that you need to sit down with a financial advisor and make a far-reaching plan for your retirement investing.
A financial advisor will be able to help you choose the right investment vehicles for your plans, and then it will be up to you to decide the best way to invest your savings.