11 Personal Finance Goals for Your 20s
Originally written by on May 26, 2015, for TheArtofManiliness.com
…so naturally, everyone is going to have different financial goals. But if you’re feeling confused and overwhelmed about money, it’s sometimes helpful to see suggestions for milestones to hit at certain points in your life. You can then take those broad suggestions and refine them so they fit your personal circumstances.
1. Start educating yourself about personal finance. One of the weird things about the modern age is that even though money plays such a huge role in our lives, most of us don’t get any formal personal finance classes in school. Parents often don’t talk with their kids about the finer points of money management either. This is unfortunate because knowledge truly is power.
2. Create a budget. There’s a moment from my college days that I distinctly remember. It was just a few months after I was completely on my own for the first time. I was going through a stack of bills I needed to pay, and suddenly felt overwhelmed. I made just enough with my job as a waiter to cover my expenses. It felt like I would never get ahead financially with the way things were going.
3. Research health insurance options. While the number of young people with health insurance has been increasing due to the Affordable Care Act, they’re still less likely to be covered than other demographics. Many young men forgo insurance because they feel like it’s cheaper to pay the penalty to Uncle Sam than it is to pay a monthly premium for a service they’ll likely never use.
4. Start an emergency fund. Sh*t happens! Instead of taking on more debt to pay for an unexpected car repair, use the cash in your emergency fund. That extra cushion of cash can go a long way in helping you achieve your long-term financial goals. When Kate and I were newlyweds, we always kept at least $1,000 in a savings account. There were several times when we were forced to dip into it for car repairs and the like, but because we had the money there, we never felt strapped for cash, even though we weren’t making much at the time.
5. Eliminate credit card debt. One of the best investments you can make in your young financial life is to eliminate high-interest credit card debt. With the average interest rate hovering around 13%, credit card purchases can get really expensive, really fast. As personal finance author, Beth Kobliner notes in her book Get a Financial Life when you pay off a credit card bill with a 14% interest rate, “you’re in effect paying yourself 14%, guaranteed, and tax-free.” That’s an amazing return on investment!
6. Start tracking your credit score. While you might not be planning to purchase a home or a car anytime soon, once you do, you’ll need to have good credit to take out a mortgage or a car loan. The financial moves you make when you’re 23 and dirt poor can affect your credit score when you’re 33 and applying for a mortgage. So it’s a good idea to start tracking how the banks view your creditworthiness by requesting a free yearly credit report and checking your number every year or so.
7. Start a retirement account. It’s almost become a tiresome cliché in personal finance books and blog posts, but it doesn’t make it any less true: time is your biggest ally when investing.
8. Plan your debt repayment for student loans. Once you’ve paid down your high-interest debt, set aside $1,000 for an emergency fund, and opened up that retirement account, the next step is to put in place a plan to pay off the rest of your debt, and for most 20-somethings that debt is going to be made up primarily of student loans.
9. Start a side hustle. Besides finding ways to save money while in your 20s, start looking for ways to earn more moola. Getting in the habit of creating multiple income streams will not only build your personal wealth but serve you well as you get older. With today’s volatile and competitive job market, you can’t rely on a steady paycheck from a corporate gig. Don’t put all your eggs in one basket — have other sources of cash coming in.
10. Practice negotiating. If there’s one skill I wish I spent more time developing in my 20s, it’s negotiating. I suck at it. I’ve probably left thousands of dollars on the table because of my haggling deficiency. That stings.
11. Set long-term financial goals. If you can accomplish the above ten financial goals, you’re going to be in a great position financially compared to other 20-somethings. It’s now time to start thinking about longer-term financial goals. It could be saving up a certain amount for a down payment on a home or getting a certain net worth in your 40s. Whatever those goals are, write them down and start plugging away at them.
you start dying when you stop dreaming.