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Traders Paradise will walk you through some suggestions on how to manage money in your 20s.
Life as a young 20-something-year-old is an exciting time. Who is going to take care of own personal finance so early?
You may not think of your 20s as the time to buckle down financially. Between starter salaries and student loans, many 20-somethings are just managing to get by. But actually, your 20s are the ideal time to set the stage for a financially secure existence. Yes, it is the right time to take care of your personal finance. Both, now and in the future.
You’ve likely graduated from college, started your first real-world job, and are making decisions on your own. Your adult life has just begun and retirement seems years away. Now is important to start discussing your personal finance options, managing your money responsibly, and planning for your future.
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Personal finance refers to how you manage your money, including your income, expenses, and savings. When you put an effort into managing your personal finances, you have a better grasp on where your money is going and what changes you can make to meet your future financial goals.
Taking the time to manage your personal finance better can really pay off. It can help you stay on top of your bills and save thousands of dollars each year. You can use these extra savings to pay off any debts you might have, put them towards your pension, or spend them on your next car or holiday.
Create a budget to protect your personal finance
There’s perhaps nothing more critical than creating a budget. Without a budget, however, you’ll have a tough time tracking your finances and identifying key savings opportunities. So, if you don’t have one yet, take a time to map out your living costs.
Budgeting is the process of tracking your income, bills, and expenses in order to assess how much you can spend and what you can afford each month. Creating a budget and sticking to it is the foundation for personal financial success as it helps you to live within your means and avoid debt.
You don’t need a fancy tool to create a budget. All you need to do is open up a spreadsheet on your computer, list your various expenses. You should include those random ones that pop up once a year. Then compare what you’re spending to what you’re earning. If the numbers don’t align, then you’ll need to work on making some changes to ensure that you leave yourself enough space for savings.
When creating a budget, you have to write down:
- Your income: How much are you making each pay period?
- Your expenses and recurring payments: What does your rent/mortgage, utilities, groceries, and gas add up to each month?
- Debts owed: How much do you owe for student loans, car payment, credit card debt?
Pay yourself first – Start your emergency savings
The recommendation of personal finance is to pay yourself first. The first bill paid each month should be money to your savings account. Then your essential bills and anything left over at the end of the month is fun money. The biggest mistake is the younger generations make is not saving early enough. They tend to put off savings until their 30s. This is wrong.
Just because you’re on the younger side doesn’t mean you’re immune to financial emergencies. Quite the contrary. Without emergency savings, you may have no choice but to rack up costly debt to compensate. A better bet is to have an emergency fund with at least three months’ worth of living expenses. Ideally, more like six months’ worth.
Having emergency savings is so important, in fact, that it should pretty much trump any other financial goal you have.
Let’s look at an example: Assuming you want to have $1 million in savings by the time you retire at age 65. This is how much you’ll need to invest each month:
Time is on your side when you’re young. You should save around 20% of your income. That should help you maintain your current lifestyle in retirement. If you want more travel and more fun stuff during retirement, saving 30% of your income will help you live a lifestyle above what you’re currently living.
A little bit of money saved now is going to make a big difference later in your personal finance.
Pay off present debt to secure personal finance
According to a recent study by LendingTree, the average millennial has an average of $24,000 in debt. This can paralyze your financial, and even your physical and mental health.
Update on Feb 12, 2019 – We received an email from our visitor Christopher Trum, Content Manager LendingTree Brands, that asked us:
”I was reading a recent article on Traders Paradise (traders-paradise.com/2019/01/personal-finance) and wanted to thank you for including data from our research study!”
With his permission, here is the link with full access to the original source
AVAILABLE FOR US residents ONLY
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