The first 10 years of your life are spent learning about everything in your immediate surroundings, what’s edible, what’s safe, what's good/bad behaviour etc. Your second decade is spent learning about yourself, who you are, what you want and where you want to go in life. However, the decade that can shape your future the most is potentially your 20’s. It is widely believed that as a (young) adult, you have all the skills required to begin planning for your future and by establishing certain foundations in your 20’s, you could successfully carry these throughout your life.
Your 20’s, I believe, are the years you should utilise to cultivate your financial independence through the implementation of certain simple habits. Success within certain rituals will help develop the foundations I mentioned previously for a more prosperous and less wasteful future. Years of careless spending will undoubtedly catch up with everyone eventually, regardless of how much you earn. So, if you know anyone in their 20’s (or who still spends like they're in their 20's) I would highly recommend that you suggest these tips, which I've found to be sound advice to take on board.
Budgeting is the single most important financial action anyone can take, and by learning to do so properly in your 20’s, you can drastically improve your chances of affording the things you really want in the years to come. Numerous students leave college or university after having lived off borrowed (student loan) or free (bursaries) money provided by the government, with no real grasp yet of the true value of money. At first it may feel restricting, but budgeting is frankly quite the opposite. This habit gives you the freedom and the structure required to control your money the way a financially astute person would.
Budgeting 101: Start by writing down your monthly income, minus all your monthly costs and you will be left with your available liquidity. This is the figure you can work with to save towards goals or spend on yourself or even pay off debt.
Long Term Saving
Hopeful 20 something’s have a sense of the world being their feet and they allow their dreams to run wild on what their future holds. This is a great way to lay the foundations for saving if, for example, you would like to own a house, invest in a rental property or travel the world.
If you want to travel for a month every year, break it down so that you can see how much you need to save every month towards your trip. Flights are X, hotels are Y and eating and drinking will cost Z. Add up all these costs and divide by the amount of months you have until you travel to see how much you need to save each month to afford the journey. This concept of budgeting for the future forms the basics of working towards a long-term goal successfully.
As an example, if you wanted $1,000,000 by the time you were 65 years old, you would need to save $1,184 per month from the age of 20 and not touch it until you were 65 (this does factor in interest rates at 2.3% and income tax at 25%).
Learning to distinguish between a quality investment and a poor investment will also prove invaluable for your financial success in the future. Take a vehicle for example, buying a cheap car for a few hundred or a few thousand bucks might really suit your pocket at the time. However, a little research shows that generally cheap cars with upward of 200,000 kilometres on the clock usually become financial sink wholes, where everything starts going wrong and replacements become expensive.
As you would with this car, also think about appliances in your home as another example. Cheaper products may consume twice the power of a slightly more expensive machine. That cost over time may actually mean you end up paying 4 times the purchase price due to its energy consumption. This kind of invaluable information is available online, you just need to know where to look. In fact, right here on Buckscoop you'll find plenty of this sort of information either here in the blog or on the Deals page across a broad range of products and services. The point being, research your more expensive purchases before splurging so that you can be sure of making an informed decision that allows you to get the best value for money over time.
Even simple meals made at home will drastically reduce your monthly expenditure on feeding yourself. If you weren’t taught this while growing up, there is nothing stopping you from learning on your own now. Every chef under the sun has their own arsenal of recipes / cookbooks, plus YouTube has more cooking walkthroughs than your bank account has dollar notes.
If you’re somebody new to cooking and a bit lazy about making your own food then start, for example, by forgetting that next pizza delivery that costs $12+ and buy frozen pizzas at $2+. The saving is instant and when you don’t feel like cooking, you’ve got a quick and easy option waiting for you in the freezer. Of course there are far healthier options out there which are just as economical, so try to move yourself to these gradually over time.
Never Stop Learning
Education is one of the most amazing gifts we can give ourselves. Unlike any other species on the planet, we are able to learn vast amounts of information across an immensely broad range of topics. Take for example the learning of how to become more frugal in your 20s, this is information you carry with you for the rest of your life. Your work and experience is another asset nobody can take away from you. There are always new and exciting things to learn and with the right attitude you can use this information to improve your life - and your financial situation.
Nobody has all the answers, but by listening to other people’s experiences with money, it can really help you get a better understanding about how you should manage your own finances. Another valuable post you can learn from is my previous “Thinking like a Millionaire could Save you Money and Help you Spend Less” post.