There’s a big difference between saving in your 20s and saving in your 30s. If you’re a young adult, here are money-saving tips that can help you achieve financial freedom.
It’s important to save money at any age, but there’s a huge difference in how you should save money from one decade to another. There are several reasons for this, including changes in your income, new expenses, and even in your motivations. Each change in your lifestyle comes with new financial demands, and a major transition in your life will come when you enter the third decade. So in this article, we will talk about essential money-saving tips for young adults in their 20s and 30s.
Your 20s is the time when you’re adjusting to the “real world.” You probably have an entry-level job, living with your roommates or on your own, and paying for your own bills. You probably don’t regard saving as important as you’re still experiencing your newfound freedom, and having fun.
Meanwhile, you’re more settled in life in your 30s. You might be considering getting married, or have already been hitched. You might also be considering buying a home, or already paying a mortgage. You may be thinking about having kids, or may already have your own little family. Because of such huge lifestyle differences between your 20s and 30s, it’s easy to see why you should have different saving strategies for each decade of your life.
Here are useful tips on how to save your money during each of these crucial decades in your life.
In your 20s
Establish a budget
When you were in college, you were likely told by your parents to budget your allowance, but like most college students, you probably didn’t heed the advice. This is quite understandable, not to mention expected. But now that you’re making your own money, you’ve got to figure out how to divide it among your weekly expenses like food and gas, bills, and emergency fund. It’s also to put away some for your wants, but without establishing a realistic budget, you’re at risk of spending more money than you can afford.
Build an emergency fund
We can’t stress it enough, but you need a rainy day fund if you don’t want to end up turning to your parents for help. That’s not a healthy habit to develop, so start saving money for a rainy day fund. This will come in significantly handy to pay for a deposit if you need to move to a new place unexpectedly, or for repairs, if your car suddenly breaks down. Consider saving at least 10 percent of your monthly paycheck until you have at least three months of your expenses saved.
Contribute to your workplace retirement savings
Most companies offer a retirement savings plan for their where they match their employee’s contribution to a certain amount. Take advantage of this and contribute as much as you can to maximize your employer’s match. Ideally, you should try to save 10-15 percent of your income. But in your early 20s, the most important thing is that you are saving for your retirement, regardless of how much it is. Establishing good savings habits at an early age lays the groundwork for a secure financial future.
Devise a plan to repay your debt
At this age, it’s easy for you to incur debt that exceeds your yearly income. However, you may still see it as some abstract number that can not weigh you down, which can be a dangerous way to think. Debt is real, and more so for young adults. Student loans can be a burden for several years. Add credit card debt and you might be paying off debt until you die.
You need to be aggressive about paying off your debt. You can’t simply dismiss it by resigning yourself to the fact that it’s something you can never get rid of. Consider a loan repayment plan for your student loans, and make sure not to let your credit card debt spiral out of control. Limit your spending and live within your budget.
Develop your marketable skills
Not everyone lands their dream job after college. And these days, young adults tend to switch jobs frequently in search of the right workplace. Hopefully, you’re picking up new skills with each job, but it would also benefit you to take on new and different responsibilities at each job to make yourself more marketable. Pick up more skills to improve your chances of landing better jobs. Learning goes on even years after you’re done with school.
In your 30s
Adjust your budget
When you’re in your 30s, you should be earning more than entry-level income. If you saved money in your 20s, you should already have a fair amount of savings by this time. However, your needs are also more different in your 30s than in your 20s. You may have already gone through some major life changes like having your own family and buying a home, so you will need to adjust your budget. Now that you have a new set of financial goals, you need to slice up your budget differently than you did a decade earlier. You might need to spend less on your wants and use that money on something more essential. You might need to allocate your pay raise for paying for your new home. Buying a new home is likely the biggest expense you’ll undertake in your 30s, and it will require a readjustment of the budget you established when you were in your 20s.
Increase your savings
Now that you’re earning more, you should also be saving more. Increase your contribution to your emergency fund, or make your savings work harder for you. In other words, find ways to earn interest on your savings.
In your 20s, the thought of investing or growing your savings may not have crossed your mind, so you kept your money in a traditional savings account. However, there are better ways to use that money and make it work for you, like parking it in an online savings account, a money market account, or a checking account that yields high interest. Do your research or ask a financial advisor for the best savings rates.
Save more for retirement
Retirement is still a long way from this decade, but since you’re earning more money now, you also need to increase your contributions. If you used to save 3 percent of your paycheck in your 20s because paying debts was your priority, you should now increase that savings to at least 15 percent for your retirement fund. Increase your contributions every time you get a pay raise. If you start saving enough for retirement in your 30s, you avoid the risk of going broke when you retire.
Pay off your debt
Hopefully, you’ve developed a debt repayment plan in your 20s and have been sticking to it faithfully. This is because in your third decade in life, you’ll have more expenses to think about like paying for your home, getting a new car, or having kids. These major life decisions lead to more debt in your life, so make sure to pay off all your student loans and credit card debts so that you can focus more on saving for your retirement in your 40s.
Advance your career
Gaining experience and developing your skills set was your focus in your 20s. But now that you’ve acquired several different skills through all those jobs you’ve held, you should try to reach for your earnings potential. If you’re no longer happy with your job, move on before you end up getting stuck in a job that drives you crazy. Making the switch is risky, but that’s what your emergency fund is for. If you’re content with your job, evaluate your skills and position and consider helping yourself move up the company ladder.
Expert financial services in Brookhaven, Mississippi
Diving into the real world after college can be overwhelming. And whatever career you have, it can be daunting to handle life’s finances. That is why we recommend reaching out for help or guidance from people who are experts in money management and wealth-building. If you’d like to learn more about handling your finances, message us at Money Mgt. Inc. today! We are a financial services company located in Brookhaven, Mississippi, and we’ve been in the industry since 1969. Call us today and let us help you live a worry-free retirement life!
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