Most 20-somethings face enormous financial distress such as lack of economic stability, crushing student loans, stagnant wages and pressure over saving early for retirement. On top of that, they might have to worry about paying rent and keeping up with basic costs of living. That’s when knowing how to manage money becomes a necessity.
Here are few suggestions that will help improve your financial life:
1. Growing income shouldn't increase your expenses. When your income grows, don’t increase your expenses. Continue living the same way as before. That will help to save and build up wealth faster.
2. Stay with parents. Consider living at your parents’ house for bit longer. It would help to save your monthly rent money. There is nothing wrong with that and don’t worry what others say. You are doing it to boost your savings.
3. Create a “rainyday fund”. Try to save up some funds enough to cover 6 months of your expenses and don’t touch it. By not touching it, I mean forget about it. Promise yourself to access it only in case of a real emergency.
4. Limit credit cards usage. Spending borrowed funds is easy but paying off the balance later on is hard. Using credit card is like borrowing from your future-self, in other words taking money you’ll have in the future and giving it to yourself today. Plus there is an additional cost called interest that you need to pay on top of it.
5. Invest in education. Don’t cut money from education or things you want to learn. “Knowledge is power”, you’ve probably heard this phrase for at least 2000 times. Investing in yourself bears the best interest.
6. Avoid purchasing a vehicle. The advice here is not to buy a car unless you have no alternative to move around. Cars are not normally considered a great investment. Along with depreciation, you will need to keep up with expenses such as insurance, car payments, tickets, carwash, car service, tolls etc.
7. Get insured. Make sure to purchase a health insurance, especially if you have dependents. It will protect you and your family in an event of a serious illness or injury that could end up being very costly.
8. Don’t buy avocado toasts. Australian millionaire Tim Gurner told us that the main cause preventing young people from buying homes is that they spend too much on avocado toasts. Yet he obviously overexaggerated so if you want to eat an avocado toast, all we can say is bon appetit.
Good luck in your most “formative” decade of your life.
By Rashid Khasanov
Photographs by Giphy.
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