We agree – the temptation to live life to the fullest in your 20s is very much real. But those shopping sprees and daily coffee runs can strain your financial life in the long run.
A huge part of coming into your own terms in your 20s is adopting good habits that you can maintain. Financial management is one such move.
Not sure where to begin? We’re here to help. Here are four financial moves you can make in your late 20s:
Table of Contents
1. Learn Financial Literacy
The idea of learning in your late 20s is intimidating. Isn’t it too late? How is it going to help me? Shouldn’t I be focusing on my career? Hundreds of concerns swirl through your mind. But when it comes to financial literacy, learning has practical value and lasting positive impacts.
Financial literacy is the knowledge and skills to understand and manage personal finances. You learn concepts like budgeting, debt management, investing, and saving in a way that paves the way to financial independence.
The best part? Improving financial literacy is super easy. You can enrol in free online financial literacy classes and courses. An online financial literacy course will prepare you for managing real-world financial aspects.
2. Create an Emergency Fund
Is creating an emergency fund even necessary at this age? Yes! No one plans on getting sick or losing their job. But life can throw a curveball at the worst time possible, and you have no choice but to deal with it. An emergency fund, thus, is a safety net.
Save at least three to six months of living expenses to cover unexpected costs. You can even automate contributions to avoid manual hassle.
Set up an account that’s separate from your main spending account and is easy to access. Even if you don’t have massive emergency funds, save at least $1,000. You can learn more about emergency funds by enrolling in a personal finance course with industry leaders such as Intuit.
3. Build Your Credit Score
Having debt in your late 20s is completely normal. But keep an eye on your credit score, too.
You need a credit score of at least 720 to make borrowing easier. Lenders will offer you low interest rates and high borrowing power. This will help you borrow money for a house, vehicle, and other big expenses.
If you don’t have a credit history, start by taking out a credit card. Remember to pay the bill in full each month. Avoid incurring interest so lenders know you’re a reliable, trustworthy borrower.
4. Learn to Invest
When you start investing in your 20s, you have time on your side. The longer your money is in the market, the more it will accumulate. You can also leverage compounding. Investing even a small amount of money in your 20s can result in big savings.
Check if your employer offers a retirement plan. Contributing to a 401(k), traditional IRA, and Roth IRA can set up a good foundation for your future self.
Pro tip? Consider investing with the sole aim of building a retirement fund. You will have motivation and a great chance of financial independence.