How to Invest in Your 20s: Financial Steps Every Young Professional Should Take
Unless you were born with a silver spoon, your 20s are most likely to be a time when you will find yourself counting every single penny, dreading the rent payments, and saving just enough so that you can have lunch with your friends at the newest café in town or buy that much-coveted pair of shoes (after it goes on sale, of course).
At a time when you are living paycheck to paycheck, it goes without saying that the thought of investing would hardly cross your mind. Even if you have found a well-paying job and are doing quite well financially (lucky for you), you might not pay heed to investments this early on. Or perhaps you have been saving meticulously for quite some time but judging by the ever-increasing prices, you wonder if the better alternative is to fund the research on particle physics instead – because if you could just travel back to the ‘70s, at least you can afford to buy your own house, right?
Boomers might criticize this generation for ‘having it too easy,’ but only the wearer knows where the shoe pinches. Millennials face the greatest difficulties when it comes to monetary matters and ensuring a financially safe future. If you dread paying your utility bills, have a back-crushing debt burden from student loans, and start counting the days until the next salary by the middle of the month, you probably know it already – the struggle is real!
But it’s time to take some serious action: spam emails, bad fashion trends and financial stress – be gone!
If you are in your 20s, take note of the following steps you must take to become richer and more financially independent in the future.
Create a Budget
How carefully do you plan and budget for buying top-of-the-line beauty products or going on a trip with your friends? Well, properly enough for you to achieve the goal, right?
The same amount of planning and careful budgeting ought to be applied to your overall finances as well.
To become wealthy and financially secure, you need a well-drafted plan and stick to it in the long run. Creating a budget is boring for sure. But it is the first step towards accruing wealth because it gives you a clear and precise idea of how much money you currently have and how much you can afford to spend.
Keeping track of your expenses enables you to cut down wherever you can and channel the savings towards more profitable means instead.
Cut Your Biggest (or Unnecessary) Bills
Perhaps it’s booking an Uber or taking a taxi too frequently, dining out every other day, or a monthly subscription to an ‘amazing’ health and fitness service (gym/ magazine/ fitness blogs, etc – how many times did you actually follow or benefit from it, again?).
Look into your spending habits and analyze what makes up the biggest chunk of your monthly expenditure. There might be several items that might seem harmless apparently, but their net effect might be burning a hole in your pocket.
Try to cut down on the unnecessary expenditures as much as you can. You will feel some pain but do it anyways –sweet rewards await in the future.
Have Multiple Sources of Income
As the famous saying goes, never put all your eggs in one basket – and to add to that statement, never rely on one source of income.
Whether you have found your dream job or not, try to increase your average earnings in whatever way possible. Freelancing can be a great way to earn some extra bucks or you can work a part-time job if your schedule permits. And if you aren’t afraid to take a leap, why not start a small-scale business or a home-based service on anything you are good at?
Forget heartbreaks, failed tests, or the job you couldn’t get, one of the major regrets that many people have in later years of their life is not leveraging the benefits of investing and compounding when they were in their 20s.
Millennials are generally pretty smart when it comes to finances, but if you somehow happen to be amongst the minority that forgoes their company’s 401(k) plan and instead chooses to keep that small amount of cash in the bank each month, you need to revisit and revise your decision as soon as possible.
Compound interest has a snowball effect which means investors earn interest in not just what they initially invested, but also on the extra amount that they have accumulated so far.
Search for Your Options
One of the biggest problems in our society is that no one will teach you about banking, paying your taxes, investing, or anything that actually has to do with finances.
But at least you know all about Pythagoras’s Theorem, right?
It’s a common dilemma, but criticizing the education system will do you no good. Time to use all those self-study skills that you developed as a student!
To look on the bright side, you won’t have to issue every other book from the accounting section at the library. A quick online search on how to invest, where to invest, and the most promising areas to do so will turn up great results.
From stocks and bonds to mutual funds, physical commodities, and savings accounts, there are several different ways in which you can invest your money in your 20s.
If finding a $10 bill in your old jeans pocket is the only ‘extra money’ you have ever received so far, it’s time to take action and start keeping your money in more promising places where it won’t just remain a crumpled bill of the same face-value, but actually increase multifold in just a couple of years.
Let Technology Handle it All
From ordering a cup of coffee and booking a ride home to finding cleaning services for your house, your smartphone is probably serving you in ways that would put even Richie Rich’s cool robot maid Irona to shame. But what most millennials save in terms of time and resources from the use of technology in everyday chores, they spend on lining up to pay for bills and checking their remaining bank balance every now and then.
Automating such procedures and letting technology handle it all is one of the most effective steps you can take towards stabilizing your finances. Apps like Wealthfort, Acorns, and Mint keep you connected to your budget and savings at all times. Such apps provide you ingenious ways to manage your finances like never before. Got spare change? Invest it into paying off your student loans, gemstones, real estate etc. Wondering if the new apple-flavored iced latte topped with a donut is worth trying? See its effect on your debt payments and how much it might set you back.
Although these tips won’t get you to the point where you can substitute tissue paper with ten-dollar bills, they will help you get your finances under control so that don’t contemplate selling a kidney every time you have to pay your bills.