Leading up to our 30s, many of us hope to have finally figured it out. It’s the age when people start their professional lives and face new challenges, so it’s a crucial time to save for the future and make wise investments. And the earlier you start, the more you’ll reap the benefits. In this article, I’ll discuss everything you need to know about money before turning 30.
1. Create a Financial Plan
Before you start earning, you need a financial plan. It’ll help track your income, expenses, and investments. Start by setting financial goals like buying a house or investing in a mutual fund. Your financial plan should include your monthly budget, emergency fund, and short-term and long-term goals.
2. Live Below Your Means
It’s one of the most important things to learn while managing money. As a young adult, it’s easy to spend more than you earn. Psychologist Daniel Kahneman showed that we make financial decisions based on 90% emotion and only 10% logic. Avoid this trap and live below your means.
3. Invest Consistently
Investing money consistently is a great habit to start early in life. The power of compound interest works in favor of those who invest young. Consider putting away at least 15% of your earnings in a tax-advantaged retirement account and save money for other options like stocks, index funds, or a high-yield savings account.
4. Manage Your Debt
Getting a credit card or taking out loans can be tempting, but it’s essential that you manage your debt. Calculate your debt-to-income ratio and pay off any high-interest debts first. Choose an affordable lifestyle to avoid the cycle of minimum payments and pay off your cards as quickly as possible. Never spend more than you can afford.
5. Protect Your Credit Score
Your credit score is critical to your financial future. It’s used by lenders, landlords, and many others to determine your creditworthiness. A good score can help you secure lower interest rates on loans, lower insurance premiums, and qualify for higher credit limits. Maintaining good credit is a must for your financial health.
6. Make Insurance a Priority
Insurance is a central part of your financial health. It’s a protection against unexpected events that can harm your finances. Make it a priority to get insured for your health, vehicle, life, and home. It helps you prepare for emergencies without breaking the bank.
7. Learn to Say No
Learning to say no to your friends and family can be challenging but necessary if you don’t want to go broke. Saying no to unwanted expenses today can save you a lot of money in the future. Who cares about impressing others with expensive habits? It’s okay to say no to protect your financial goals.
Emotions Influence Financial Decisions
Most of us don’t learn about personal finance until we’re forced to with painful and costly experiences. Money’s complicated since tracking our spending, or lack thereof, isn’t a math problem; it’s a psychology problem that requires managing your emotions and behavior.
By following these seven steps, you can get financially healthier. We don’t know what we don’t know, so asking a professional for more tips isn’t a bad idea either. If saving money is the gap between your ego and your income, it’ll take some practice and discipline to create a cushion for your future, but if you develop a plan now you can achieve the lifestyle you’ve always wanted.
