Most people don’t even plan their finances until they are in their late 50s and are just starting to think about their retirement.
But if you wait until the very last minute before planning your finances, there’s a chance that you’ll never have enough money to retire comfortably.
I’m sure you often hear people working way past their retirement age. It could be that 70-year-old cleaner who still has to wake up at 5AM every morning, or the 80-year-old rag and bone man.
And whilst I sympathise with them, this problem can easily be avoided, if you start planning early.
If you’re still in your 20s or 30s, now is the best time to start.
Warren Buffett once said, “Someone is sitting in the shade today because someone planted a tree a long time ago”.
Now is the time to sow your seeds and plant your tree, so that you may enjoy the fruits of your labour in times to come.
1. “When You’re 20, Be a Good Student” – Jack Ma
Now is not the right time to focus on money. You’re still young, and you still have a long journey ahead of you.
Almost all of the successful people have one thing in common: None of them focused solely on the money when they first got started.
Warren Buffett offered to work for Benjamin Graham for free, and it was Bill Gate’s passion for computers that drove him, not money.
Jack Ma, founder of Alibaba, says that your 20s is the best time to gain experience. You have nothing to lose and everything to gain by being a good student.
2. “When You’re 30, Follow Somebody” – Jack Ma
Your game plan when you reach 30 is slightly different when you’re 20 years old.
At 20, you go out there and you learn as much as possible. But when you’re 30, you look out for someone you can to follow.
“So before 30 years old, it’s not which company you go to, it’s which boss you follow. A good boss teaches you differently.”
3. Develop a Marketable Skill
Before you start thinking about how you’re going to make tons of money, think about the skills you need to take you to where you want to go.
Develop a highly-valued skill that adds a lot of value to your career. Differentiate yourself. Become really good at something (and not just average at everything).
Always be on the lookout for opportunities to develop your skills. And once you’ve decided on a particular skill you wish to develop, actively seek out opportunities to practise that skill to the fullest.
4. Save Money Early
The best time to save money is when you’re still young. Your job might not pay you much, but your expenses are the lowest it’ll ever be in your life.
You’re probably still staying at your parents’ house. You might not have kids yet. And you’re in the best state of health.
Start by setting aside a fixed amount of money from your monthly salary and transfer it to a separate savings account.
5. Get Insurance
The best time to get insurance is when you don’t need it.
It’s a horrible experience to suddenly fall sick and not have any money to pay your medical bills, or when your house suddenly catches on fire, and you’re left with nothing.
Getting insurance gives you a peace of mind, knowing that your family will not be burdened should anything misfortunate happen to you.
6. Eliminate Credit Card Debt ASAP
If you own a credit card, you might have outstanding credit card debts. And you must work to eliminate all of this debt as quickly as possible.
Pay off all your credit card debts as soon as possible – even before you put any money into your savings account or start investing (unless your investments have a higher interest rate than your debts – unlikely).
Take this example: The interest rate credit cards are about 24%, while the interest rate for savings accounts are so low it’s sad.
By putting money in your savings account, it’s helping you earn a fraction of a fraction of a percentage, while your loans are doubling every 3 years or so.
If you have credit card debt, empty out your bank account to repay the debts now. And sell your collections of CDs if you need to.
7. Invest Your Money
30 years old is not too young to start investing. In fact, the earlier you start, the better it is for you, because you can leverage of your greatest asset – time.
Because you’re still young, take your time to learn all about investment you’re interested in before actually risking actual money.
Now, many people mistake investing and trading.
Investing is a long-term strategy where you usually buy an asset and hold it for a long time, while trading is a short-term strategy, where the trader hopes to profit from price fluctuations.
Most retail traders lose money, because they lack the knowledge, technique, resources, and time commitment to trade profitably.
However, many investors can actually profit from their investments (albeit at a lower rate than professional traders). You won’t get rich overnight from your investments, so don’t be greedy.
8. Develop Smart Financial Habits
When you’re young (and not very rich), you need to develop frugal spending habits. Most self-made millionaires live a very frugal lifestyle.
Warren Buffett, despite his fame and fortune, famously still lives in the house he bought back in 1957 for $31,500.
When you have more money (from a pay raise or from elsewhere), invest that money instead of spending it all on material goods that only give you a temporary high.
9. Set Goals
Set financial goals, life goals, career goals, relationship goals and personal goals. Goals motivate you to strive for your best and prevent you from going off track.
You should always keep in mind the dream lifestyle that you want to live, and you should build up enough passive income to sustain that lifestyle.
You could invest in stocks and get dividends, write a book and get royalties, or even start an online business that doesn’t require a lot of time commitment from you (you can outsource most tasks).
10. Always Believe in Yourself
My final quote from the legendary investor Warren Buffett is this: “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
In order to manifest success, you must first have an unwavering belief that you’re going to succeed, no matter what happens.
And also as importantly, you must commit to doing whatever it takes to succeed, and never give up, even in the face of failures.