RelayRides blogger Amanda L. Grossman shows 20-somethings how to build a solid financial future with these 5 financial tips.
Your 20s are quite the interesting decade in life. I can say that with the bit of distance and the self-analysis I’ve completed now that I’m approaching my 32nd birthday.
It’s a hugely important time in finding out who you really are, as you’ve most likely left behind your parents (or wish you could), but haven’t yet figured out or settled into the life you thought you’d have by now. In other words, it’s a decade of transitions, questioning, and experimentation.
The other thing about this decade in your life is how critical it can play in terms of your overall financial health for your 30s, 40s, and beyond. So while it may feel like you’re treading water personally and financially (while still enjoying some wild nights and first’s), there are several key financial tips you should heed to set yourself up for a wonderful future.
The Power of Compound Interest and Young Age are with You
There is an incredible opportunity that older, high income-producing people do not have (and you do): your age and compound interest.
Since there are many, many years before you and retirement, any money you set aside today and either invest or save will grow huge returns for you. Delaying this 5-10 years means that you will have to save more money out of your own pocket to afford retirement instead of allowing your money to work for you and reap compound interest and returns. Trust me, your older self will thank you greatly.
Live Like a Student for as Long as You Can
You’re most likely earning the least amount of income that you will ever earn in your life, and lifestyle inflation has not had the chance to creep in.
So take full advantage of this opportunity. Instead of blowing your paychecks to afford the kind of life you thought you’d be living in your 20s, live more like a student. Hold off on buying a new car, stop yourself from revamping your entire wardrobe, and think twice about living alone in an expensive apartment instead of having a roommate.
Sure, you can enjoy splurges here and there. But the longer you can live like the student you were not too long ago, the more money you can funnel towards debt repayment and savings. And this will set you up for an incredible future.
Lots of Mindless Consumption Can Turn into Debt Anxiety
It might be fun to consume, consume, consume.
But trust me when I say that mindless consumption can leave a nasty debt hangover for years to come. Do yourself a favor and learn the ultra-important tip of living within your means – spending less than what you make plus saving a little money each month – while your income is still low. Over the years it will only get easier and easier.
Make Use of Your Idle Assets to Supplement Income
While we’re on the topic of earning the least amount of money in your career, you should know that there are ways to supplement your pay and help bridge the gap between pay day and your expenses plus savings.
Places like Airbnb allow you to rent out your living space when you are not using it, or just a room. You can also pick up extra cash by renting out your vehicle when it’s not in use (which turns out for most to be about 90% of the time).
Save in Preparation for the Life You Want to Build
You may not be where you want to be right now in your life. Heck, you might not even know where you want to be or belong. But I can give you some direction here: you will likely want to fall in love and offer a sound financial future to your mate one day. This could or could not include a home and a family. You likely will want to travel one day, and you will definitely not want to have a miserable retirement.
So start saving today in preparation for the life you want to build, even if you don’t exactly know what it’s going to look like. Otherwise, you may wake up one day and find that even though it makes sense for you and your soul mate to make some big decisions, you’ve got nothing to put towards them and will have to delay.