Top 5 Personal Finance Priorities in Your 20s
Managing your finances in your 20s can be a burden, to say the least. Maybe you just started your first salary job or moved into your own place. These life events may hinder you from focusing on managing your money and the importance of starting to save for retirement. Instead of viewing this as an overwhelming point in your life, I’d challenge you to take the perspective that this is a time to instill good habits.
These habits could mean a difference of hundreds of thousands of dollars. No, that number isn’t an exaggeration and I’ll explain how in a later post. But for now, let’s go over my top 5 personal finance priorities for your 20s.
1. Find a bank you love. This may seem basic but I can’t emphasize how important it is. We all know banks are different and so are the products they offer. This may be as simple as finding one with a free checking account or one that has a mortgage lender that is great to work with. Personally, I look for one that has free mobile banking, no ATM fees, and the ability to easily transfer money in and out.
2. Know your credit score. Nothing brings me more pain than when people tell me that they ruined their credit in their 20s. This is usually caused by irresponsible credit card spending or getting evicted from an apartment/rental house for not paying rent. Credit takes a long time to build but only one instance to ruin. Take it seriously because when you go into a lenders office to try and buy a house or car you’ll need it.
3. Understand your debt. You may have student loans, and unfortunately, they aren’t going to magically go away, so build a plan to deal with them. Whether you have $10,000 or $50,000, you will have a monthly payment amount. The whole point of this monthly payment is to make it your debt more manageable and to direct your focus away from the lump sum. There are also federal government plans that are aimed to help you manage this debt, but solely basing the plan off of a potential government forgiveness program isn’t recommended.
4. Build your emergency fund. If you’ve heard it once, you’ve heard it one hundred times: You need an emergency fund and that’s the bottom line. This doesn’t have to be anything crazy, but you need to have at least 3 months of expenses stashed away somewhere. This isn’t spending money, this is for emergencies only.
5. Start budgeting. If you take care of the four items above, then you are already almost done building a budget, so just finish it out. Hitting your personal finance goals takes a plan. Knowing your monthly income and expenses will help you plan for the future and allow you more freedom with your money down the road.
There you have it, my top 5 personal finance priorities for people in their 20s. Remember, this list is the bare minimum and doesn’t include other important things like maximizing an employer’s 401k or setting savings goals, but this topic will be the focus of one of my future articles.
Do you have any other things that you think should be on this list?
Let me know in the comments below!