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Finances in your 20s

3 January 2013 One Comment

            If you ask someone who is no longer in their 20’s what they would have changed about themselves financially while in this age bracket many would have done things differently. I am not referring to wishing they had picked the lottery numbers each week but with regards to saving their money for the future. On the flip side of this however I find the same people who are, for example in their 50s, doing very little more than they did in their 20’s to save for their future. The reason is people generally life for the moment and it is easy to place yourself outside of these parameters or after-the-fact and wish you would have only eaten beans and rice and had no social life in your 20’s to save money, in a sense selfishly, to enjoy life a little better now. This is unpractical.

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            So how does one balance their finances in their 20’s? The 20’s are probably the most influential decade of your adult life. You set in place many habits as well, not to mention this is usually where the majority of your formal education beyond high school takes place. While this can be expensive, this kind of debt is usually considered not only a necessity but a debt worth having. Being in your 20’s can also set many patterns for your social life and provides a chance to create many life friends. Are the 20’s your best years? Well not necessarily but if you are simply trying to save all of your money in hopes of a better future you may be selling yourself short.

What is the best way to approach your finances in your early adult life? Carefully. We all know everyone has a different financial situation at this or any age. Some can easily put a down payment on a house, or buy it outright for that matter, others are scratching their head as to where they can find money to buy a few groceries. Also, some people are more comfortable living with a little more financial risk than others. One thing we can all agree on is to stay out of debt, not referring to a mortgage you can afford, nor education you want and can afford.

Debt ends up robbing you of your future, having to pay interest is like burning your money and if it accumulates each month you can mess yourself up financially for years or decades to come. If I can heed any advice and this is a key point to always remember! Also do you very best to store away a small percentage each paycheck in a bank account as a rainy day or a “just incase reserve”. Life can through some curve balls at you and if you are unexpectedly dealt a financial blow, you will want a few extra dollars to help you out without having to go into debt. How much should this be? This is a number you must come up with since if your paychecks are very large, you can put away more but I always liked having a 10-20% amount before I had a mortgage. Also talking to a financial advisor is a good idea as they can assess your actual situation. Just goto your bank and ask to speak to one if you are interested. Here are some key points I think are worth remembering.

– keep out of debt as best as you can (an emergency may not be avoidable).

– save something each month.

– watch out for vehicles, while many deem a necessity, they are no investment and are great money pits.

– don’t always think you have to have it new, there are great items often never or rarely used at second hand stores for a fraction of the cost.

– your future will come, you can’t avoid this but don’t overestimate what you will be earning or underestimate what your expenses will be either. In life there are many expenses that come along. Adults who are earning 40, 60, 80+ thousand a year often end up spending it all.


One Comment »

  • craigb182 said:

    I haven't begun saving yet and I am early 20's (23) However a percentage of my spare cash is often put toward investing in some penny stocks. I have found this to be quite successful on the whole but I have been very careful with my investments.

    Be sure to do your homework though if you are going down this route and take advice!