When you’re in your 20s, you may not feel the need to start planning for your finances for the future.
It is, after all, a time for excitement and self-discovery. But youth also presents a wonderful opportunity for financial growth from which the rewards may be enjoyed later on in life.
Between all the things your future self will thank you for and for the things your future self will not be able to do, you’ll find that there’s plenty to accomplish before you turn 30.
To begin, here are 3 things you can do in your 20s to start building financial success in your 30s and beyond.
1) Pay down your debts
If you want to commit to pay down your debts, you should indicate how much you want to pay off in 2017 and give yourself a deadline. Start paying down your debts with the highest interest rates first and cut off those interest payments. As you pay off your loans, the money you used to put towards these bills can be set aside in savings where it will grow year after year. The sooner you pay off what you owe, the better off your wallet will be.
2) Start an Emergency Savings Fund
Financial security is important for everyone. An emergency savings fund can help individuals look forward to the future without worrying about being unprepared for financial emergencies. Financial emergencies can come in the form of a job loss, significant medical expenses, home or auto repairs or something you would never have thought it could happen. The last thing you want to do is to rely on credit cards or loans which could simply compound the problem.
The rule of thumb is at least six months of your monthly expenses saved up in your emergency fund. If you require $3,000 a month to pay off your living expenses, then you should be striving to accumulate $18,000 in an interest bearing emergency savings account. Improve your financial security and prepare for the unexpected.
3) Build your Credit History
Having good credit is an important sign of financial health and an added layer of security.
Signing up for a credit card will be the easiest alternative to start building up your credit history. Credit cards are a valuable stepping stone to measuring and tracking your credit and financial progress over time. Paying your credit card balances in full every month helps you to maintain your credit score and build up a good credit history. This will enable you to use credit to work harder for you, rather than becoming a slave to credit.
A copy of your credit report from CBS is the next step you can take on your road to financial independence. It is important to review your credit report half yearly and check your credit history. The credit report will contain a record of your credit payment history compiled from different credit providers that provides valuable insights into your financial history, knowledge and repayment behaviour. This encompasses a comprehensive assessment of your aggregate credit limits and outstanding balances under your credit cards or other facilities across financial institutions into your credit file. You become empowered to make better informed decisions for future applications of credit facilities.
Take this opportunity to review your financial goals simply and clearly to ensure a sound financial future. Maintain a checklist to keep track of your progress throughout the year and develop long-term money habits to position you for greater success.
Stay on top of your credit health.
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