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* This post is a little different, and a little special. The guest contributor for this article is not only a specialist in the financial industry, but also my husband, Gus. Prior to meeting Gus, I had little to no clue as to what to do with my money in my 20s. With his help and advice, we have been able to both save and live smartly, with a little extra left over to really make the most of our 20s.
I know, I know. The last thing you want to think about in your 20s is the rest of your life. But give these 10 tips a shot. I did, and because I followed them, Gus and I have both been able to start our financial version of “happily ever after.”
Guest Blog Post: Advice from a Financial Expert
With only 2 years left until I turn 30, I often question whether I have made the most of my 20s and if I had to do it again, whether I would change anything.
Our 20s should be a period of our lives where we not only go out, stay up way too late, make a few mistakes, make friends, explore and travel, but more importantly, plan for both our immediate and extended future.
This planning phase can be difficult for most of us. We are simply too young and, for the most part, too busy to consider getting older and planning for retirement – a mere 30 to 40 years away.
I have spent nearly 10 years in the financial industry and my experience has taught me just how important saving really is. Our retirement completely depends on making sensible money choices, such as saving and contributing to various accounts. And if we don’t make these choices, we risk having to work longer, and retiring later.
I have worked with many diverse clients: young and old, wealthy and not so wealthy, experienced and inexperienced in their prospective fields, single and married, and from a multitude of differing backgrounds and cultures. These are by far the 10 best things you can do with your money before you hit 30, setting you up for a long, healthy future, and a retirement that is perhaps earlier than you expected.
10 Things You Should Do With Your Money Before You’re 30
1) Save
One thing that not enough people do in their 20s is SAVE. Whether it be a few dollars here and there, or avoiding large, unnecessary purchases, accruing adequate funds in your savings accounts will ensure that you can afford essentials in the future. For example, buying a house or a new car is highly dependent on having sufficient savings for the down payment, or to buy them outright. Without sufficient funds saved up, you simply have no capital or any sort of proof that you are financially trustworthy, making it less likely for financial institutions to loan you money, whether it be for your dream home or your own business one day.
2) Contribute To Your 401k
From what I’ve seen working in the financial industry, those that have contributed the most to their 401k plans when they were younger have been able to retire earlier, and are able to live more comfortably. Most companies in the United States offer 401k matching, which is basically free money that is deposited into your retirement accounts each year. They typically match up to about 5 or 6% of whatever you contribute each year. Additionally, contributing to your 401k is easy to do, as it automatically comes out of your paycheck and there is no need to have to manually add to it yourself.
3) Shop Around
Making wise choices when it comes to spending your money is crucial and can prevent significant losses to your savings. Shopping around and making sure you get the best deal for groceries, an apartment to rent, clothing, or even prescription medications can ensure that you don’t overpay for something that has been overvalued, while putting more money back in your pocket when you find a bargain or a good deal.
4) Save Up For or Make a House Purchase
Investing in property, whether to live in or as a significant investment is always sound advice. Think of it this way. Your monthly rent payments go towards ensuring you have a roof over your head temporarily, but at the end of the contract or the pay cycle, you are back to where you started and still don’t own anything, nor have you gained anything. On the other hand when you’re making monthly mortgage payments, you are actually working towards owning your home. Thus, when you’re able to make monthly payments towards owning something, rather than simply paying rent, you’re not only gaining property, but also additional value.
5) Invest in the Stock Market
Over the last 100 years, the stock market has had 3 significant crashes where it dropped by more than 20% on a given day or week. However, the market recovered from each of these 3 crashes and has been able to make large gains in the years following. The stock market will always continue to grow and rise as long as we live. There will be days where it drops, but it is a great investment and will yield financial returns, particularly in the next 20 to 30 years.
6) Be Aggressive
Most people in their 20s are very cautious about their money as they’re only just beginning to save, and also at the very beginning of their financial career. Being aggressive is recommended as people in their 20s have between 30-50 years of work left before they retire. This is a very long period in which they can make aggressive choices and ride the stock market. Additionally, you can continue to make contributions to your 401k when the market is up or down, and make substantial profits.
7) Share Your Money
Sharing money with loved ones or friends can be a good idea. This can lead to joint ventures and being able to afford something that wouldn’t otherwise be affordable alone. For example, sharing a piece of property as a time share with another family member will allow you to take a luxurious trip from time to time, and enjoy something out of the ordinary. Sharing your money is also appreciated by others and more often then not, people will return the favor and come to your rescue financially when you most need it.
8) Keep Some Money Under Your Mattress
Keeping liquid money in a safe place is also a good idea. It helps to diversify your net worth and it never hurts to have some money tucked away for an emergency. A safe deposit box at home or a safe somewhere outside of your primary residence are good places to keep liquid cash. I wouldn’t recommend keeping too much of your net worth liquid as cash grows at a very low interest rate, and overall it isn’t doing much sitting around. However, it’s always wise to keep a bit stowed away should anything happen.
9) Invest in Your Education
There are few things you spend money on that you know will actually pay off. Education is one of them. If you haven’t gotten your undergrad degree yet, go for it. And if you have, definitely consider a higher degree. Not only will this make you more competitive in your prospective field, but also it will ultimately help you to command a higher salary later on. Plus, there are some awesome student loan programs out there that make getting a degree much easier.
10) Spend It!
Last but not least, spend your money! Just do it wisely. You only live once, and ultimately money exists to be spent. Your 20s are supposed to be one of the best periods of your life. One day, you’ll want to look back on this time as a period where you created some of your best, most cherished memories. Set aside money for you to indulge yourself from time to time. Perhaps you’ve been wanting to go overseas later this year, so start planning on that expense! Or maybe you’ve been meaning to visit a friend on the other side of the country, so start planning for that trip. Spend your money; just do it wisely.
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