There are big changes that occur in life when you’re in your 20s, like college graduation, starting your first job, getting married and having your own family.
It could be tough to determine goals for this decade since every person has his/her own career and life path. However, there are certain milestones that might just help make your life less stressful by the time you reach the age of 30.
Here are five financial goals to achieve by age 30.
1. Start growing your capital
Your 20s are the time to financially support yourself, whether it’s saving for your master’s degree, travel, or other activities. This is also the stage in your life where you have the opportunity to do the things you’re passionate about.
The key here is to have the ability to save a little with each money you make from your job or other sources of income. You need to learn how to live below your means for this to work.
Try setting aside a piece of your income. This way, you’ll avoid the temptation to spend the whole paycheck. And, as much as possible, aim to raise your savings for each time you receive a salary increase until you’re storing away at least 15%.
2. Take care of your debt
Paying off your debt early matters a lot. While you might not be able to settle your entire student loan balance, credit card debt, or auto loan by age 30, it’s better to take the steps necessary to reduce them in your 20s.
Procrastinate with your payments and you might find yourself defaulting and getting a beating on your credit score.
There are two ways to manage debt. First, the snowball method, where you start paying off debt in order of smallest to largest. Once the smallest debt has been dealt with, you then roll over the money you used to pay that debt into the next smallest balance.
The second strategy is the reversed version of the snowball method, also known as the avalanche method. Here, the order of the debts is determined by their interest rates. Whichever has the highest interest gets to be settled first.
3. Save for retirement
If you don’t have any financial concerns to take care of before you reach 30, try to make the most of your employer’s plan and employer’s match as soon as you qualified.
The earlier you start contributing to your employer’s 401(k) or 403(b), the longer your savings will grow because of compound interest. Also, remember to give your savings a boost with each raise you get.
On the other hand, if you weren’t able to get your hands on an employer-supported retirement fund, an alternative option would be is to set up a Roth IRA. It offers tax-free withdrawals later in life.
This type of savings account is ideal for individuals who would like to avoid taxes or penalties should they decide to withdraw their initial contributions. That means you can access your money at any time.
Include beneficiaries on your retirement and bank accounts as well as your home, as this can help simplify things for the person managing your financial affairs.
4. Apply for a Credit Card
Your 20s largely involves building a credit history and score, and an excellent way to get those done is through the responsible use of a credit card.
Not only that, but a credit card also offers a free money opportunity with cashback bonuses. The benefits will vary depending on the credit card you chose.
If you haven’t reached an average credit score yet, you can try getting a secured credit card. This type of credit card requires you to make a cash deposit. Which would serve as collateral on the account, providing the issuer with security in case you failed to make payments.
While secured credit cards often have low credit limits, getting one is easy. It can still help you establish your credit history and score.
5. Start investing
Getting involved with investing usually starts when you opened your first 401(k), although there are other means that can help you venture into the industry at a much earlier time.
While you might not be at the right age to consult with a financial advisor, your generation mostly consists of tech-savvy individuals, who are able to study, research and understand online trading tools and strategies.
Several online trading platforms offer many opportunities for both fundamental and technical analysis, as do financial and educational websites. Social media and applications can also help develop your young investing mind and expertise.
Moreover, even if you’re currently dealing with student loans or low salaries, you have time on your side, which makes compounding a good fit for you.
Compounding allows you to grow your wealth in the long term. And it only needs two things, the reinvestment of earnings and time. Simply put, the longer you put your money to work the more wealth you can generate over time.
In a nutshell
So to wrap it all up, being in your 20s is the time when you finally have the freedom to do things your way. Still, a huge part of that independence is being able to support yourself financially.
It’s wise to make sure that you’re on the right track with your money. So, now is a good time for you to start pursuing financial security.