How to Be Financially Savvy in Your 20s

Your twenties is probably one of the most exciting phases in your life. You are graduating from college, landing your first job, and having your own place. You have the energy, the time, and enough money to enjoy the good things in life. But being young does not give you the excuse to slack around all the time.

If you want to get ahead, you have to start early. Starting early gives you more time to adjust, to commit, and to correct your mistakes. You still have the time and the energy to redeem yourself and get back on track.

When you talk to people from the older generation, one of the regrets that you will hear is, “I wish I learned that when I was younger.” To avoid having the same lament, start young. The younger you start, the farther you will get ahead in life.

Here are some financial tips, from being credit card savvy to learning how to own a franchise restaurant, that you should start learning ASAP:

1. Use your credit card wisely.

Having your first credit card is like winning the town lottery. You now have that magic ticket to finally buy the latest gadgets, high-end shoes, designer bags, and other expensive items that you wanted to own. But before you get too excited, stop yourself. Do not fall into the trap of using your credit card for non-emergency items, such as clothes, bags, shoes, and toys. Soon you will find yourself spending on non-essential items, leaving you paying for your debt before your salary even arrives.

Use your credit card for travel and emergency repairs. A credit card is a financial tool that must help you, not drown you in debt.

2. Get your life insurance.

business

It is sometimes hard to get your head around the need for life insurance when you are young and healthy. Many adults often realize it too late that they should have gotten life insurance earlier. Life insurance serves as your financial protection against the uncertainties of life. The younger and healthier you are, the cheaper your premium is. This is because when you are younger, you are at lesser risks of life-threatening illnesses such as heart attack and diabetes.

Even if you do not get to avail of the death benefit, there are options to withdraw your premiums later on. You can choose products that have investment riders, which can serve as your long-term savings. You can also opt for riders such as disability coverage, which will give you a certain amount while you rest and recover.

3. Start investing.

Save for your retirement as early as now. You can invest in the stock market or trust funds for your retirement, aside from your government-mandated retirement accounts. The earlier you save for your retirement and reach your goals, the earlier you can stop working and enjoy life.

You can open an account on online brokerage platforms that allow you to invest in stocks, mutual funds, and bonds, among many others. Diversify your portfolio across different investing instruments. Putting all your eggs in one basket can be disastrous in case of market setbacks.

Before you invest, assess your risk appetite. Once you identify your risk tolerance, choose investment products that match with it. Or you can seek the help of a licensed financial adviser, who can give you research-based recommendations and advise in building your portfolio.

4. Set up an emergency fund.

Unforeseen emergencies can result in financial troubles if you are not prepared. Unexpected financial expenses or suddenly losing your job can cripple you if you do not have an emergency fund. An emergency fund helps avoid going into debt or cashing in on your savings and investments. If you have lost your job, you can use your emergency fund for your daily living expenses while you search for a new job.

Experts recommend that your emergency fund must be three to six times worth of your monthly expenses. Your emergency fund must be liquid so that you can withdraw it immediately when you need it. Avoid putting your emergency funds in mutual funds. A savings account should be the best option for your emergency fund.

5. Learn how to run a business on the side.

If you cannot afford to give up your daily 9 to 5 for a small business, you are not alone. However, you do not need to give up your day job if you want to be an entrepreneur. You can learn how to manage a fruit juice bar or ice cream parlor. You can team up with like-minded peers and family to get your business set up. A company that earns well can give your finances a boost. It will not be easy, and it will take your day-offs and time-offs. But it will be all worth it when you start cashing in on your investment.

Scroll to Top