You financial future is depicted in your 20s. Your income will be low; your debts high but having good habits when you are young can make all the difference.
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Here are important benchmarks that you should hit and how to manage your money when you are in your 20s, your 30s and in your 40s.
Grow Financial Intelligence
Your 20s is the time that you need to get it together. Determine where your money is going, make a plan for spending and saving and monitor the execution of the plan you have made.
Start an Emergency Fund
You should start putting money away in a risk free savings account that you are able to access easily id anything happens. You should set a goal of six months living expenses.
Open a Retirement Savings Account
You should look at retirement savings account and set aside a certain percentage of your income. If the company you work for has a retirement plan in place then you should try to match it.
Start with 5% of your annual income and raise it steadily with each salary increase.
Fund Your Retirement
Now that your career is on the right track you should start to fund your retirement accounts to the maximum. Create automatic deposits so that it done is done and you don’t have to think about.
Buy a Home
As you have been saving in your 20s you can use some of that money to make a solid down payment. However you should not buy a house that you can afford, but rather the house that is half the price. This allows you to pay it down quickly and then own it outright.
Don’t Succumb to Consumer Debt
Your 30s is often the time that you are buying a home and having children, which can lead to a lot of spending and debt. You need to keep focused and keep debts down.
College Saving Goals
If you want to contribute to your child’s college education then this is the time to start saving. It is a good idea to start saving as soon as your child is born.
Making Retirement Your Main Goal
Even though you are saving for your child’s college education it shouldn’t be prioritised over saving for your retirement.
Adjust College Savings
This is the time to find out how much tuition is and ensure your savings for education is on tracks. These savings might need to be adjusted or you can talk to your kids about what you can afford and the schools they can realistically go to.
Invest in an Index Fund Portfolio
If you have savings beyond what you need for an emergency then it is a good idea to fund a portfolio at a company. Set up an automatic purchase plan that will add more shares to your account.