Emily RobertsFor many people in their 20s, achieving financial security before turning 30 may seem like an impossibility. But achieving financial security doesn’t have to mean giving up your current way of life. In fact, establishing financial security may have benefits that are noticeable right away, such as lowering the tension that comes with being insecure about money. Here are 10 recommendations for achieving financial stability before the age of 30.
In a Nutshell
- Track your expenditures and live within your means to keep your spending under control.
- Instead of using loans to finance a lifestyle, borrow money to invest in your future or yourself.
- To assist you in achieving long term goals, set precise, measurable short term targets.
- Develop your financial literacy to help you make wise investment and financial decisions.
- Start your retirement savings early and benefit from your employer’s contributions.
- While you’re still young, take sensible risks to learn from your mistakes and improve your chances of success.
- Invest in yourself by keeping your knowledge and abilities up to date.
- Strike the correct balance between living in the moment and setting money up for the future.
Alex Goodman1. Control your Expenses
Knowing how much you spend and on what keeps your expenses under control. A free app like Mint can help you do that.
You may find that ordering food delivery several times a week costs you more than $300 a month, or that recurring charges for streaming services and subscriptions you never use are a waste of your hard earned money. If you can afford to spend hundreds of euros a month on food delivery, great. If not, you’ve just discovered an easy way to save money, plus cancel those streaming services you forgot you had.
Financial security is a journey, not a destination.
Suze Orman
2. Live Within your Means
Keep your standard of living below what your income will allow. As you advance in your career and gain more experience, your salary should increase. But instead of using this excess income to buy new toys and live a more luxurious lifestyle, it’s best to put the money toward reducing debt or increasing savings. If the cost of your lifestyle lags behind the growth of your income, you will always have excess liquidity that you can put toward financial goals or an unexpected financial emergency.
3. Don’t Borrow to Finance a Lifestyle.
Borrowed money should be used when the earnings exceed the costs of the loan. This may mean investing in yourself: in your education, starting a business or buying a home. In these cases, loans can provide you with the leverage you need to reach your financial goals more quickly.
On the other hand, using credit for a lifestyle you cannot afford is a losing proposition when it comes to building wealth. In addition, the interest added to the loans further increases the cost of the lifestyle.
4. Set Short Term Objectives
Life holds many uncertainties, such as an economic downturn or the loss of a job, and many things can change between your 20s and 40s, for example, when you retire. So the prospect of planning for the long term can seem daunting.
Instead of setting long term goals, set a series of small, short term goals that are measurable and precise; for example, pay off credit card debt within a year or contribute to a retirement plan with a fixed contribution each month. If you set goals, you are more likely to achieve them than if you just say you want to pay off debt, but don’t set a timetable. Even the process of writing down goals can help you reach them.
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As you achieve short term goals, set new ones. Consistently setting and achieving short term goals will help you reach longer term goals, such as having a solid nest egg when you retire.
5. Acquire Financial Knowledge
Earning money is one thing, but saving and growing it is another. Financial management and investing are lifelong endeavors. Spending time and effort to acquire knowledge in the areas of personal finance and investing will pay off over a lifetime. Making sound financial and investment decisions is important to achieving your financial goals.
6. Save What you can for Retirement
When you’re in your 20s, retirement seems far away and planning for it may be the last thing on your mind. If you can take a few steps now to start saving, compounding will work in your favor. Even a small amount saved early in your life can make a big difference in your future. The longer you wait, the harder it will be to save for retirement.
Try setting up automatic monthly contributions to a retirement plan, such as a company sponsored 401(k) plan if you have access to one, or an IRA if you don’t. You can increase your contributions when your income increases or when you’ve reached more short term goals.If you put the “pay yourself first” ideal into practice, you won’t have to worry about how much you contribute. The most important thing is to develop the habit of saving.
7. Do not Leave Money on the Table
If you work for a company that offers a 401(k) plan, be sure to contribute at least up to the maximum of what your employer will match, otherwise you will be leaving money on the table. In addition, you can deduct your contributions in the year you make them, which reduces your taxable income for the year.
If you do not work for a company that offers a 401(k) plan, contributions to a traditional IRA will also save you taxes, since you can also deduct the contributions.
8. Assume Calculated Risks
Taking calculated risks when you are young can be a prudent decision in the long run. You may make mistakes along the way, but when you’re young you have more time to recover from them.Some examples of calculated risks are
- Move to a new city with more job opportunities
- Go back to school for additional training
- Take a new job at a different company for less pay but more upside potential
- Invest in high risk/high return stocks
As people age, some take on more responsibilities, such as paying a mortgage or saving for a child’s education. It is easier to take risks when you have fewer responsibilities.
9. Invest in Yourself
Consider yourself a financial asset. Investing in yourself will pay off in the future. Your skills, knowledge and experience are your greatest assets. Increase your value by continually updating your skills and knowledge and choosing your career path wisely.
While this investment often starts with college or trade school, keeping skills up to date and learning new ones that are in high demand can help you become a more attractive and higher paying part of the workforce. Investing in yourself should continue throughout your life.
10. Finding the Right Balance
It is also important to find the right balance between life now and the future. Financially, we cannot live as if today is our last day. We have to decide between what we spend today and what we will spend in the future. For example, set a short term goal of saving for a trip to a destination you’ve always wanted to see instead of using a credit card to finance it. Finding the right balance is an important step in achieving financial security.
Wrap Up for Financial Security
With the correct mindset and behaviors, financial security can be attained by the age of 30. You may strive toward financial security without giving up your existing way of life by managing your expenditures, avoiding unnecessary borrowing, making short term objectives, being financially knowledgeable, saving for retirement, taking measured risks, investing in yourself, and striking the appropriate balance. Never forget that achieving financial security is a lifelong journey that can begin at any time.
FAQs for Financial Security
Absolutely, financial security can be attained before the age of 30. You may take charge of your money and work toward your financial objectives by following the 10 steps described in this article.
No, achieving financial security does not necessitate depriving oneself. You can achieve financial security without lowering your standard of living by exercising self control over your spending, living within your means, and setting short term goals.
It is not a good idea to borrow money to finance a lifestyle you cannot afford if you want to increase your wealth. Instead, invest in yourself by using the borrowed funds to finance your schooling, a new business, or the purchase of a house.
Early in life, even a tiny amount saved can have a significant impact on your future. If you have access to a company sponsored 401(k) plan or an IRA if you don’t, try setting up automatic monthly contributions to one. As you advance, you can raise your contributions. If your income rises or as more of your immediate goals are accomplished, you can raise your contributions.
It is crucial to invest in oneself. Your biggest advantages are your knowledge, experience, and talents. By keeping your knowledge and abilities up to date and making wise professional decisions, you may increase their worth. All of your life should be invested in this.
Article sources
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- Forbes | Financial Security – 30 Things To Do With Your Finances Before Turning 30
- Kiplinger | Financial Security – 10 Financial Commandments for Your 30s
- Internal Revenue Service | Financial Security – 401(k) Plan Overview
- ClearTax – 5 Things to Achieve with Your Money Before Turning 30
- Internal Revenue Service | Financial Security – IRA Deduction Limits
