“What keeps me going is goals”
Your twenties are a time to discover yourself – what you’re passionate about, where you fit in this crazy world, while making mistakes along the way and hopefully learning from them. It’s an exhilarating time in anyone’s life, full of promise and opportunity, but also of uncertainty. Fortunately, your financial life doesn’t have to be. It’s a great decade to set yourself up for the future you always imagined, and even if you’re not in your twenties it’s never too late!
Broadly speaking, when it comes to spending money Millennials tend to be motivated by experiences as opposed to the acquisition of things, like travel and music festivals for example. Funding these experiences is not always cheap though and, considering that 42 percent of Millennials claim that debt is their biggest financial concern, that lack of cash flow can be a limiting factor on enjoying the activities you want to without worrying about the credit card bill at the end of the month.
That’s why it’s important to have financial goals, and stick to them. They don’t have to be long-term goals like get married, have three kids, and live in the most exciting neighborhood. It can be something as simple as an upcoming trip abroad, or taking your significant other out to a great new restaurant. What do you want to do, a week, a month, a year from now? That’s the easy part – the next step is asking yourself, “How am I going to pay for that?”
That’s where my Three Financial Rules for your twenties comes in:
- Invest the time now to create a financial plan and build a budget. Beginning this work now will set a solid foundation that can grow with your life and career. Start with your monthly income and then deduct each expense to balance to zero, essentially giving each dollar a job. Expense items should include rent/mortgage, car insurance, cell phone, books/tuition, groceries, electricity/gas, dining out, savings etc. Be sure to budget a line you can transfer to your savings each month to save for that upcoming trip or unexpected emergency.
- Begin paying down debt and building your credit history. Make debt payments on time and try to put any extra funds towards debt repayment, which will reduce the amount you pay in interest. When you go to buy a house, car or even apply for a job, your credit history may be pulled and it’s important to show a history of on-time, reliable payments.
- Start saving for retirement. It may seem like you have plenty of time until you even need to start thinking about retiring, but putting aside a small amount now will give it time to grow. When it comes to retirement, the more time you have to save, the better.
These three financial rules are simple things you can start to think about now in order to set yourself up for success later. Not setting goals can be costly in the future – write down your goals with specific timelines and you will reach them faster when you can see them on paper. You’ll be surprised at how making a few wise financial choices now can open new doors for you down the road.
What are your financial goals, how are you achieving them? What are some things you wish you had done earlier? Leave me a comment below – I would love to hear your thoughts.