Your 20s is a time to enjoy your freedom and learn new life lessons. Often a decade of important decisions (career, marriage, home), it can also be a time for big financial mistakes if you’re not careful.
Making smart financial decisions now could lead to financial freedom in the future. It could mean the difference between retiring early or late, or whether you can afford the vacation home you’ve always dreamed about. Here are a few steps to build a solid financial foundation in your 20s.
1. Develop a marketable skill. Income is your wealth builder, and your 20s is a time to learn what you love – if you’re lucky, it will be what you went to school for. Find a skill that could translate into a career.
2. Make a simple budget. Sound easy? It is. By learning to create a budget now and sticking to it, you’ll also be able to apply that principle later in life.
3. Create a debt-repayment plan. Yes, you aren’t the only one who has enormous amounts of student debt. And waiting to pay it off until you’re more established in your career could have negative effects on your financial stability. Start paying it back now. It’s easy to set up automatic payments online so you aren’t tempted to skip a month.
4. Build an emergency fund. Even though you may live on little these days, it’s smart to have at least $1,000 set aside for emergencies. After all, it’s inevitable that your clunker car will break down eventually.
5. Start your retirement saving. Don’t stop reading now! This might be the hardest one to put into action, but completely worth it. The key to long-term compounding is to start early. If a 25-year-old invests just $100 a month, assuming an 8% average annual return, it totals to more than $300,000 by the age of 65.*
6. Start building your credit. Make sure to keep up with monthly payments on your loans and credit cards because that will be beneficial for your credit score. If you are considering opening a credit card, Navigator Credit Union has competitive interest rates and can help you manage payments.
* Rate of return is for illustration only and does not represent the return of any specific investment. Your returns will vary. Depending on the type of account, taxes may be due upon withdrawal.
Investment (and/or insurance) products:
Not federally insured
Not a deposit of this institution
May lose value