You got to realize that when I was 20 years old, I had a house, a Mercedes, a Corvette and a million dollars in the bank before I could buy alcohol legally – Dr Dre
Your twenties signify an important point in life, one that could either develop or destroy you. It is in your twenties that you land yourself a career, slowly start paying your own bills, get your own place and perhaps start making decisions in regard to marriage and family.
Your life definitely changes and with it requires a stable financial foundation. While many twenty year-olds believe that it’s too early for them to start investing, I believe that there’s no better time like the twenties to start putting your money to work for you. Developing good spending and saving habits and learning to budget and invest during your twenties can help prevent unnecessary debts.
Most if not all financially successful people took advantage of their twenties to develop themselves. You have fewer responsibilities then, meaning you can save a significant portion of your income or invest it for the future.
So how can you secure your financial foundation while in your twenties?
A people without a vision will perish. It all starts with identifying one’s short, medium and long-term goals. Your short term goals could include: Buying furniture for your place, investing in bonds or shares or starting a small business. Medium term goals include prospects of owning your own home and financing your kid’s college education. Finally, your long-term goals could be saving for retirement. Try to estimate how much you need to meet each of your goals. This will help determine how much you need to save each month to reach that goal within your time frame.
Next comes identifying ways through which you meet your goals. Winning the lottery will quickly propel you into realizing those goals, but again, winning probabilities are low, meaning budgeting your income is the only alternative. When budgeting, set aside money to go towards your short, medium, and long-term goals. Try not to sacrifice one for the other. Don’t find out the hard way that you can’t start in your forties, saving for retirement, and expect to catch up with those who started in their twenties. Each goal is relatively important thus should be given the same amount of consideration.
Lastly, invest to meet your goals. Invest in the money market for those short term goals, and the stock market for your medium and long-term goals. The stock market has historically proven to out-perform any other type of investment, but again, it isn’t for the fainthearted. Take a retirement pension plan to secure your retirement years. The earlier you start, the less premiums you contribute, thus less pressure on your income.
Time is a significant asset while in your twenties, take advantage of it to secure your future.