10 Money Commandments for Your 20s
You just graduated and started your first “real” job. Or maybe your second. Or even your third. Wherever you are in your 20s, life is rapidly becoming very real. Student loans are really coming due. Your career is actually beginning, and you are signing for that first car loan and graduate school is being considered.
And, perhaps most shockingly, you are now being forced to become (more or less) financially self-sufficient despite never having been formally trained on the ins and outs of personal finance.
With the stage set, here are 10 Money Commandments to live by in your 20s.
- Day 1 Budget: Your 20s are a time to create habits that will enhance your life in the coming decades. Be sure to get started with a budget from day one. “This is what I can spend; this is what I can’t.”
- Free Money: Many companies now offer a 401(k) “match” on employee contributions, and yet many people don’t take full advantage of what is truly free money. If possible be sure to set your contributions high enough to maximize the match and get every penny of your free money!
- Autopilot Your Savings: Determine how much you need to save to meet your various life goals and then set up your accounts (i.e., savings, 401(k), IRA) to automatically contribute the necessary amount. By turning your savings on autopilot, you’ll never “forget” to save.
- Emergencies R’ Us: Start and maintain an emergency savings account that you can tap into if you lose your job, need a major home repair, or something worse. The rule of thumb is 3-6 months of expenses saved in an easily accessible account.
- Donate Time, Not Money: If you have student loans to pay off or are looking to buy a home, consider donating your time instead of your money. Time is often more abundant than money in your 20s, so try donating your time until your financial feet are planted solidly on the ground.
- Prioritize Debt: Seven in 10 students graduate college with student debt. It is undoubtedly a fact of life. When there are competing priorities clamoring for limited resources – in this case loan payments – the best thing to do is prioritize. Typically your best bet is to pay off the debt that has the highest interest rate.
- Guard Against the Unexpected: Death and disability aren’t fun topics, but they are real. And so are the risks. Don’t overlook the importance of properly ensuring your life and your talents. Be sure to speak with someone who can objectively (i.e., not someone trying to sell you insurance) analyze your needs.
- Eighth Wonder of the World: Albert Einstein once said, “Compound interest is the eighth wonder of the world.” In short, if you have a little money now and invest it over a long period of time, it will compound (grow) into a significantly larger amount in the future. Take full advantage of the years ahead by investing now.
- Give the Raise to Your Future Self: Try and look at that 5 percent raise you just received not as more money to spend, but instead as more money to save. When you get a raise, bump up your auto-piloted savings to account for the increase in pay. Your future self will thank you immensely later!
- Value Alignment: Determine what you value most in life and then begin to align your values with how you spend your most limited resources: your time and money.
New to Lifewise?
Providing the perfect blend of powerful technology and human guidance, Lifewise is geared toward young professionals searching for a better way to make wise choices and sound financial decisions. Backed by BerganKDV Wealth Management, Lifewise is supported by a team of CPAs, CFPs and CFAs who stand ready to guide you through every financial challenge and windfall.Learn more