Financial Planning In Your 20s

1. UNDERSTAND HOW YOUR MONEY WORKS. In your 20’s you should begin to understand how your money works and learn how to budget. Promote good spending habits that will hold you in good stead. This is also the time to acquire skills which you will use to earn an income.

2. THINK ABOUT GENERATING INCOME THROUGH YOUR OWN BUSINESS. It is also becoming more important to learn how to become an entrepreneur in the current economic environment. Even if you have to borrow money to open a new business, learn and acquire new skills to start up a business of your own. This is also a time to save for defined goals. Build up an emergency fund, ideally three times your monthly salary for those unplanned changes in your career. You effectively have one third of your life to save for one third of your life. In your 20’s when you might not be earning enough money to save large amounts of money, a small investment in an equity based investment that increases with inflation every year, will be worth a fortune when you retire. You will probably not need life cover at this stage but you should consider an income replacement benefit which will pay out in the event of inability to work.

3. START INVESTING. From the moment you earn an income. It is easier to save small amounts over a long period of time then large amounts over a short period of time. Ideally you should be putting away 10% of your income.

4. THINK ABOUT RETIRING FINANCIALLY SECURE. In your 20s, you’re probably graduating from college, settling into a career and making some major life decisions. While you’re thinking about who to marry, where to live and which career to choose, don’t put your retirement on the back burner. Sure, you have plenty of time to save for retirement – probably 40 years or more. But this decade is when you’ll build the financial habits that will carry you through to a wonderful retirement. With that in mind, here are some retirement moves to consider now to begin building those crucial financial habits. Read about 10 Smart Retirement Moves to Make in Your 20s.

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