Money hacks when you’re in your 20s and 30s
Categories: Financial wellness
Tags: Budgeting, Credit Health, Financial education, Financial Health, Financial Literacy, Financial Planning, Financial Tips, Managing your Money
In our 20s and even our 30s, we tend to live for the moment. While that is not a bad thing, when it comes to finances we have to keep the future in mind. Building healthy money habits from early on is essential for our long-term financial success and wellbeing.
The sooner you start making a financial plan for yourself, the brighter your future will be. Nobody is born financially savvy and while saving, for instance, comes easier for some people than for others, we all can – and have to – learn good financial habits and exercise our money management muscles.
Here are some financial basics you have to put in place early on in your career. And even if you are no longer in your 20s or 30s, work through the list in any event – it is never too late to get your finances in order!
- Develop a marketable skill.
Having a skill is different from 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 very well 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”.
- Establish a budget.
As soon as you start earning money, your most important job is to draw up a 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 the future. These goals are hugely important when it comes to determining your spending priorities.
- Get insured.
Life is unpredictable (#covid-19), and as an adult, you are responsible for protecting yourself and all your stuff from it. 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.
- Clear debt.
Never ignore your debt. Face it 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.
- 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.
Contributing to your fund should be a top priority in your budget. Think about it as paying yourself first, and aim to put away at least 10% of each paycheck until you reach your goal. Remember to boost your fund any time you get some extra income, such as a bonus or birthday gift.
- 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 the maximum benefit from the magic of compounding.
- 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.
- 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.
- 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.
- 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.
- Don’t try to keep up with the Mavusos.
Never try to keep up with the neighbours by spending money you don’t have and taking on mountains of debt. Instead of comparing yourself or your stuff with others, just focus on your financial goals, live according to your budget, and be happy with your own life.
- Manage your own finances, even if you get married.
You have to take control of your finances at some point, and the sooner you start, the better. This also applies if you get married. One spouse should not be in charge of what you spend or paying the bills. You should both have a say in where your household money goes, and take equal responsibility for financial tasks.