Navigating the murky waters
of financial planning in your 20s is no easy task. With the economy perennially
in a state of flux and debt on the rise, maintaining a healthy financial life
has proven to be even more challenging. We spoke to some finance gurus and
experts to glean from them the following that could throw ideas and provide
1.Save. This money is not for immediate use, it
isn’t even for foreseeable use. This money
is for the long-term, and can be diversified through a number of different
investments and unit trusts. These banking faculties ensure that the money
you’re putting away is reaching its maximum potential and will serve you well,
when the need for it arises. The amount being saved will depend on monthly
income and expenses. Increasing this as you progress to each stage of life is
recommended and will serve you well when the time comes to reap these rewards.
2. Budget. Keep
track of your monthly expenses and reduce frivolous spending. A detailed review
of your expenses in a month can help determine the money you need to cover it.
After all essential expenses such as rent or loan repayments, the cost for
essential items such as food and toiletries should be calculated next. The last
to follow is optional expenses such as eating out or luxury spend. In doing
this, it ensures all the important factors are covered while leaving room for
the occasional splurge.
3. Emergency funds. Life can be unpredictable. With this come unforeseen costs.
To prepare for this, experts recommend creating an emergency fund. This fund is
an accumulation of money that is put away to access should the need arise. It
can be used on an unexpected medical emergency or sudden job loss. The creation
of this ensures that debt is not incurred and long-term savings are spared. It
should be placed in a bank account that is quick and easy to access so the
funds are available immediately should you need it.
4. Assets. Acquiring
assets such as vehicles or property is an important investment into the future.
Using the finance options available also has its benefits. Creating a positive
credit score is important for anyone especially later on in life when business
loans may be needed or when opening accounts. While vehicles depreciate
quicker, these are assets that can be kept for years at a time and can be used
as collateral for a better model when the opportunity arises. Property is also
an investment and does not depreciate.
5. Retirement funds. Time waits for no man and age catches up with us all. This
is why saving for retirement is something that should be started as early as
possible. Everyone wants to age comfortably. To do this, it means taking the
initiative while you’re young. Over and above the pension or preservation fund
being accumulated through your job, setting up a retirement annuity is also
highly recommended. This ensures that either a lump sum or monthly stipend is
received ensuring that you age in style.
Being in your 20s can be
exhilarating and terrifying all at once. The events of your 20s are a
significant factor in how you approach the rest of your life. The one thing you
want to make sure is that your finances are in order. Debt globally is the
highest that it has ever been, and the economy is in recession. Preparing now
makes sure that you weather the storm. With calmer seas, you’ll reap the
rewards instead of being stranded with no lifeline. Let your finances be one of
the things you do well in your 20s.
Article published in Forbes Africa by Simone Sribrath