scorecardresearch6 financial decisions 20-year-olds should make for a better future

6 financial decisions 20-year-olds should make for a better future

Updated: 23 May 2022, 08:30 AM IST
TL;DR.
  • 20s is the best time to cultivate good financial habits.
In the initial phases of adulthood, it is important to bring discipline into the spending habits and avoid impulse shopping. There is a high probability that you might later regret purchasing those items on a whim.

In the initial phases of adulthood, it is important to bring discipline into the spending habits and avoid impulse shopping. There is a high probability that you might later regret purchasing those items on a whim.

We all know that living frugally and saving for the future is something all of us should be doing. If you’re in your 20s, now is the time to start taking control of your finances and investing in your financial future. Here are some things you can do in your 20s to help with your financial savings and investments.

Avoid impulse shopping

It is very easy to give in to the temptation of impulse shopping in the current scenario. Buy now pay later apps, shopping malls, credit cards, and online shopping sites have made it easier to spend on money that we think we need.

In the initial phases of adulthood, it is important to bring discipline into the spending habits and avoid impulse shopping. There is a high probability that you might later regret purchasing those items on a whim.

However, we understand that it is quite hard to do so, especially when you are new to the taste of money. If you know you are prone to impulse shopping, it would be best to avoid shopping malls or letting your items stay in the online shopping cart for a few days before finalising the order.

Avoiding impulse shopping can make it easier for you to follow your budget.

Make a realistic budget and stick to it

Take a look at your money, i.e., your expenses and income, and make a budget as your first step. A budget will assist you in deciding when and how to spend your money, giving you control over your finances. It also allows you to unwind because you know your priorities are taken care of.

To help you manage your money without any worries, start by making a realistic budget and sticking to it. Most people aim to create a perfect budget that will help them save more and spend less. But, they may not be able to adhere to it as they don't consider the realities.

While it is okay to have a goal of creating and sticking to the perfect budget, it is also important to understand that it may not be possible to get there the first time. Hence, it is important to create a budget that works for you. There are many budgeting rules, such as the 50-30-20 rule, where you need to allocate 50% of your income towards needs, 30% towards wants, and save and invest 20% of the income.

Get good at negotiating and getting deals

There are numerous ways to save money on everyday purchases, such as clothing and food. This could entail figuring out the best time to buy clothing items or get a good price on a new car. There are ways to save money on anything from groceries to furniture.

If you are a female, then learning how to negotiate for a better price becomes important as multiple studies* have shown that women pay more than men for the same item. And over a lifespan, the difference compounds over time.

You can save a lot of money throughout your life if you make shopping for a bargain a habit.

Set financial goals

In your 20s, you may not have very significant money goals except saving money for having fun, travelling, or saving for higher education. But sooner than you think, you might have to take care of real financial responsibilities such as caring for your elderly parents, marriage, and raising kids.

These are some common financial goals that you can look at investing in your 20s if you don’t have any financial goals.

If you think that you don’t need to set financial goals, estimate the amount of money you will need to look after your parents, plan a wedding, or put your kids to school. If you know what I am talking about, you will understand that you need to get started on these goals ASAP.

Plan for your goals

Once you have set your goals, it is time to plan it.

Spend some time thinking about and planning for your financial future. This plan should take you through all of your major financial milestones, from purchasing a home to paying for your kid's college education if you plan on having children.

Sitting down and planning it all out may seem daunting, but it will help you prioritise your goals and determine when and how to spend your time and money.

You can consider visiting a financial planner if you need help planning for your goals and revise the plan whenever required.

Build a side hustle

It is easier for anyone to cultivate a side hustle in this current day and age. The 20s are the best time to have a side hustle as you are less likely to have other family responsibilities to take care of.

It is advisable to have a side job in an area you are already well-versed in or a field you want to become better. This will help you increase your income and save more money for your future goals.

Conclusion

The decisions you make when you're twenty years old can have a huge impact on your financial status in the future. Making poor choices could set you back significantly as an adult and prevent you from reaching your full potential financially. This article outlines the six important points that you need to cultivate in your 20s to have a better financial future

 

Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.

First Published: 23 May 2022, 08:30 AM IST