5 Things You Must Do in Your 20s to Protect Your Financial Future

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Source: Thinkstock

Most people think of their 20s as a time of exploration and fun, but not necessarily a time to get serious about finances. While it’s true that when you are in your 20s you often have many more decades to get your financial future together, you will set yourself up for a stronger financial future if you start early. If you are still in college or trying to start your career, you probably can’t save much, but anything will help. There are so many articles out now about why people wait too long to start saving and what happens when you don’t save enough or start early (hint: the result is bad). So if you are still in your 20s and you are able to, start prioritizing your savings now. Here are five ways you can do this.

1. Make goals

Even if you are still in college or your first job pays so low that you really need all of your money to pay for your bills, you can still set goals. Determine how much you need each month for your bills, how much you want to have for fun, and how much you can save. Determine when you plan to be able to increase your savings, and how much you need to save in order to have the lifestyle you want. If possible, set aside even a little bit of your income now and save it for the future. You should make short-term goals (for example, paying off small student loan debt) and long-term goals (paying off a mortgage.) You should also prioritize your goals: If you have to choose between saving for a fancy car and paying off debt, make sure you are making the right decision for your own circumstances.

If possible, you should also start investment savings as well, but make it a priority to focus on your emergency fund first, in case you lose your job or a large unexpected expense arises.

2. Start saving for retirement now

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Source: Thinkstock

You should start saving for retirement as soon as you possibly can. Retirement seems far away when you are just starting your career, but the time will go quickly, and the more money you save, the better off you will be later on. If you start early your money will have more time to grow. Your needs might grow or change as you age as well, so you will do yourself a favor by starting early. Just saving a little bit each month will put you ahead, but actually making a rough determination of what you will need for retirement will help you even more. You can start by using a Retirement Calculator. You may not know yet if you are going to get married or have children, or even where you plan to live long-term, but you can still start saving now. Also, don’t let retirement scare you: It may be far away, but some people avoid saving simply from not understanding what they need to consider or feeling overwhelmed by retirement costs in general.

3. Live within your means

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Source: Thinkstock

If you’re going to blow money on things you don’t need, your 20s is probably the time to do it. If you don’t have anyone depending on you yet, it is acceptable to purchase things you might not otherwise purchase. Your 20s is a great time to travel as well. However, even if you make financial decisions that you might not make in twenty or thirty years, you should still try to keep a budget and avoid using credit cards for expenses you can’t pay back quickly. If you really want to travel, save for your trip. If you want a new tablet, make a budget to determine where the money will come from. If you make smart financial decisions in your 20s, you will be setting yourself up for a strong financial future. In addition, avoiding debt will also help raise your credit score, particularly if you pay your bills regularly and on time.

4. Pay off debt

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Source: Thinkstock

Hopefully your financial goals include paying off debt. If you came out of college with large student loan debt, you should definitely try to pay as much as possible each month on your debt. If your student loan payments don’t start immediately, you can still save money by paying on the principal amount before the interest payments begin. Depending on your interest rate, you might have more expensive debt to pay off, like a car loan. The more you can pay now, the better, because most people have more dependents (and possibly, more bills) as they age. Lastly, avoid credit cards, and if you have credit card debt, do your best to pay it off as quickly as possible. High credit card debt comes with expensive interest, and the potential to harm your credit as well if you consistently have too high of a credit utilization percent (the ideal range is usually 20-30 percent at most.)

5. Take care of yourself

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Eat well, exercise, and go to the doctor. These three directions seem so simple, and yet, many people avoid going to the doctor’s office regularly. Others get in an exercise rut, or believe that they can start exercising regularly later in life. Eating a nutritious diet will help you live a healthy life and most likely will also help you feel good each day. Exercise will help your body stay strong, which will increase your chances of avoiding expensive hospital bills later in life. Finally, going to your regular annual checkup (at the minimum) will help you catch any potentially serious conditions before they get out of hand. All three of these items will save you money in the long run because if you are healthy, you hopefully will have less medical bills.

Taking care of yourself also includes getting insurance. If your company offers insurance, you should sign up. You may choose to wait to purchase life insurance until you are older or have more people counting on you, but health insurance is a must. Going to the dentist regularly is also important because not taking care of your teeth can result in very expensive (and painful) bills down the line. You may find that dental and vision insurance are a waste of money, in which case you should budget for your regular appointments yourself.

In your 20s you still have so much of your life ahead of you, and you still have time to save. However, starting now will help you avoid playing catch up later.

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