Do you want to gain financial independence?
Successful people START NOW. Failures wait for better circumstances.
Your life changes phenomenally in your 20s. From moving into your first apartment to getting your first paycheck, you’re steered into becoming independent fast.
One of the most important things you need to learn in your 20s is how to manage your money effectively. This may seem overwhelming at first, especially if you’re also having to pay off student loan debt as well as find enough money to cover accommodation, a car, etc.. But taking control of your finances is possible.
Here’s how you can gain financial independence:
- Pay off your student loan debt as soon as possible. Student debt haunts a lot of 20-something-year-olds. It’s important to get rid of debt as soon as possible so you can regain your financial freedom.
- Create a budget. To ensure you’re spending your money wisely and keeping up with all your payments, create a budget that states all your expenses.
- Establish savings goals. The sooner you start saving, the more your money will accumulate and grow. Set savings goals, including long-term (over a year), medium-term (six months to a year) and short-term (less than 6 months) goals. Once you have an idea of what you need to save for, calculate how long you will need to save for. Consider creating multiple savings accounts to save for your different goals.
- Start saving for retirement. Although retirement may seem like ages away, because of the magic of compound interest, the sooner you start saving, the more your money will grow. Your future self will thank you!
- Keep money aside for emergencies. Make sure you start building up emergency cash reserves so you have money on hand for unforeseen expenses, such as a medical emergency or a car breakdown.
- Buy an affordable car. While it may be tempting to spend a lot of money on a car, a car is not an investment but an expense, especially because it depreciates so fast. So, make sure you go with a cheaper option, such as an affordable used car. Once you’re older and more financially stable, you can upgrade your car.
- Insure your assets. Insure your valuables, such as your TV, cellphone and car.
- Get medical aid cover. Your health should be one of your top priorities. Unfortunately, decent healthcare is very expensive. Depending on the plan you choose, joining a medical aid scheme will help you afford healthcare as well as ensure that if you end up in hospital for an emergency your expenses will be covered or subsidised.
- Build up a credit history. It’s important to take on some debt without getting into dangerous debt to build up your credit history and obtain a good credit score. A good credit score will ensure lower rates on loans and credit cards.
- Sort out all your financial documents. Make sure you have all your important licenses, certificates, etc. in your possession. Keep all your banking accounts and expenses information, apartment lease, car registration and title and insurance policies in a safe and secure place that you can access when you need to.
Clean up your online accounts. Don’t let social media jeopardise future job opportunities. Many employers will search for you online. Make sure you get rid of any pictures, posts and comments that are offensive or “trashy”.