Bayport Blog

Money hacks when you’re in your 20s to build financial wellness

The sooner you start making a financial plan for yourself, the brighter your future will be. A few simple steps today will make financial health in your 30s, and the years to come, a reality.

In our 20s, life is all about now. You can’t even imagine being 40, let alone old and retired. Ironically, your 20s is also the best time to put the building blocks in place for a financially secure future. So let’s have a look at what you can – and should – do in this decade to help set you up for life.

1. Develop a marketable skill.
Having a skill is different to having a qualification. Even with more than one degree, you could find it difficult to get a job without a proven skill or experience. Focus, therefore, on developing a skill that sets you apart from other people whose qualifications are similar to yours. Also bear in mind that your first job might not be your dream job, and is probably not going to be your last job. Make the best of it, nevertheless, and learn everything you can from it – even if the lesson is “I never want to do this again”.

2. Establish a budget.
As soon as you start earning money, your most important job is to draw up a personal budget. Without a budget, you risk overspending on discretionary items and under-saving for important purchases and for your future financial independence. Start by listing all your daily expenses (such as transport costs and food) and monthly payments (rent, utilities, debts). When you know where all your money is going, you can see where to cut costs. Next, factor in your short- and long-term savings goals, such as having an emergency fund, putting new tyres on your car, or buying your own home in future. These goals are hugely important when it comes to determining your spending priorities.

3. Get insured.
Life is unpredictable (#covid-19), and as an adult you are responsible for protecting yourself and your stuff from life’s surprises. When horrible things happen to you – such as a medical emergency or a fire in your apartment – insurance may save you from shelling out thousands of rands all at once.

4. Learn about debt solutions.
Learn about debt solutions. Never ignore your debt. Face it, get debt help if necessary, and actively work at paying it off as soon as possible. Not only will you save on interest and other costs; your credit record and score will benefit from it.

5. Build an emergency fund.
Insurance alone cannot cover all eventualities. You need to have liquid savings, ie, cash available to deal with certain emergencies. Conventional wisdom says that your rainy-day fund should be enough to cover at least three months’ expenses, and should be sitting in an easy-to-access savings account.

6. Start saving for retirement.
When you’ve only just started your career, it’s almost impossible to think about retirement – but you have to. The sooner you start saving, the better, so that you can get maximum benefit from the magic of compounding.

7. Learn how to improve your credit score.
You’ll need to take on some debt and show that you can manage it in order to build up your credit history and earn a good credit score. Landlords will look at your credit score when you apply for a lease, employers often look at applicants’ credit histories as part of the recruitment process, and without a solid credit history it will be very difficult to get a loan.

8. Learn to stand on your own two feet.
As an employed young adult, your main goal is to become self-sufficient and stop relying on your parents or other family members for financial support. It can, of course, be easier said than done. If you do need financial assistance from your parents, approach them maturely and responsibly, and treat the money conversation like you would talk to any other credit provider. Draw up a repayment plan and stick to it.

9. Get your financial documents in order.
You – not someone else – should keep your birth certificate, insurance policies, vehicle registration forms and other official documents. Store all this important information in a secure place, and make sure someone you trust knows where it is.  

10. Write your will.
Whether you want to know it or not, death could happen to you tomorrow, and you have to be prepared. Without a will, complete strangers will decide how to split up your belongings and raise your children.

Stepping into adulthood and independence is very exciting. Giving it your best shot, means taking on the whole package – finances included. The good news is that we live at a time where help and advice, tips and tools are widely available. Hop over to Bayport Money Solutions for all the help you might need to achieve financial health.