Long-term financial planning may not be at the forefront of one’s mind when they’re a 20-year-old, university graduate. In fact, Rose Miller, Grants Manager at the JN Foundation, says for many young persons, money management, the stock market or retirement planning are remote ideas. However, Mrs Miller warns that a lack of focus during your 20s when it comes to your money will begin to take its toll by the time you are in your 30s.
The JN Foundation BeWi$e Financial Empowerment Programme Lead, maintained that this is why it’s important to plan ahead, noting that the sooner you determine how to manage your finances in some basic ways, the better off you’ll be.
In that vein, she highlights a few mistakes persons in their 20s should avoid, which will enable them to prosper in their 30s and beyond.
- Avoid Skipping Student Loan Payments
Delaying payment on your student loan is a bad idea. Because this will negatively affect your credit rating. The sooner those university loans are paid down, the easier it will be to manage the next phase of your life. Young persons are better off making a dent in their student loans before it’s time to settle down.
- Spending All of Your Pay Cheque
The adage, “It’s not how much you earn, but how much you save,” still rings true. If you’re spending as much as, or more than you earn, it is only a matter of time before you spiral into unmanageable debt.
That lifestyle will make it almost impossible to build significant savings. Therefore, the solution is to live within your means, not beyond.
Steer away from trying to keep up with your friends’ spending habits. Living up to your friends’ or coworkers’ standards is tempting. Choosing where to eat, what to wear, and what gadgets to buy based on what your friends are doing can ruin your budget.
- Not Establishing a Savings Goal
To save more, it’s important to start off with a clear goal; and then put a specific plan in place to achieve that goal.
Start by determining exactly what major purchases you plan for your future, such as: a home, a car, or improving your education. Next, determine how much you need to save to achieve those goals and how long a period to save the funds. Finally, set up a recurring automatic transfer from your current account to your savings account, to ensure that you’ll be consistent with your savings.
- Dipping Into Savings
Once you set up the account to take care of the goals you are trying to achieve, keep your hands out of it. You should create a mental and logistical barrier between yourself and this money. Move it into a separate account, such as a high-interest savings account, or a money-market account, which both offer higher interest rates than the traditional savings account.