Everyone knows that time is equals to money. In fact, if you have a lot of both to spend, a lot of time will allows you to stretch your money further than some of the higher incomes. The problem is – most of the 20s tend to spend their time doing nothing.
Well, it is not the fault for most of us. Everyone is born without knowledge. It takes time for the 20s to figure out how the world works when they step into the working world, much less develop a personal financial path! Nevertheless, financial security will be a lot easier to achieve for people who started early in their life. Because as bad habits evolve and grow, it will become a lot more difficult to eliminate and correct mistakes.
That is why if you are in your 20s, you should start investing, saving and stop spending on unnecessary items. If you start today, you will be enjoying the benefits that you had reaped diligently during this time when you decided to retire at 62 years old.
Here are 3 of the financial goals that you should aim during 20s:
Investing is a versatile route, but it definitely can pay off in many ways.
Exchange Traded Fund (ETF) and Index mutual funds are some good examples of how to do long term investment right. Of course, being 20s means we may have little money on our side, but do not forget time. Time means compounding interest. We certainly do have time on our side. With just a minimum of $100, you can invest in ETF using dollar average method. If you have OCBC or POSB account, you can start investing on ETF straight away (readers are advised to carry out based on own research).
2. SaveDo you know that getting rid of debt could be considered as a form of saving? Because it is saving your payments that you would otherwise have to make. Once your debt is eliminated, you should start saving up for an emergency fund, which should be around 3 to 6 months of your gross monthly income if you are working full time. Having an emergency fund can carry you through rough times that may just come along at some point in your 20s.
This may be the easiest point to explain, but definitely the hardest to perform. You have to spend less than you earn. I repeat, less than you earn. There are many budgeting methods in financial industry. However, I believe 50/20/30 guide suits best for 20s. 50% with being your fixed cost, example would be utilities bills, rents or any bills that have to be paid on monthly basis. It is recommended to spend less than 40% for your fixed costs, so that you could save the remaining 10% on investments. 20% will be for your saving goals. It can be short term like vacation or emergency fund to down payment on your future house as long term.Lastly for the 30%, it will be used for flexible spending. It can range from eating out to entertainment. Groceries even though it is necessities are included under flexible spending because how you spend your money on food vary on individuals.
When you have achieved all 3 goals, it will in turn, allow you to reach financial stability and free to make choices in the future. If you always spend everything you own, aka living pay check to pay check. Very soon, your choice might just disappear once you can no longer make money like you can today.