When you’re in your 20s, you’re not thinking much about your paycheck. Let me rephrase that – you are thinking about your paycheck and financial resolutions in terms of being able to pay rent, car insurance, and any other bills you may have.
What you aren’t thinking about is the long-term impact of your paycheck, such as retirement, savings, and so on. All of that seems so far away, what’s the point of worrying about it now?
The earlier you start letting your money work for you, the more money you’ll have in the long-run. That’s why it’s important to start getting savvy with financial resolutions that actually pay off in your 20s. By starting now, you’ll be setting yourself up really well in the long-run.
Sure, it seems far away – and we’re not just talking about retirement. A wedding, buying a house, getting a new car, children – all of those are big financial milestones. They all may seem far away right now, but you they may be closer than you think.
A Big Pay Off You Can Start Building Now
For those reasons, and more, it’s so important to start taking your finances seriously. How can you do that? By making – and keeping – some financial resolutions.
Here are the financial resolutions that actually pay off in your 20s. Not only will you already start to see some of the positive impacts in your 20s by doing these things, but you’re also creating a nice long-term payoff because you’re taking advantage of the most important thing – time.
1) Build a 3-6 Month Emergency Fund
We don’t want to scare you, but let’s be honest – layoffs have been everywhere this year. You should prepare for the worst, just in case. This is why having an emergency fund set can help.
You never know when a job loss, unexpected expenses, or a debt can arise. By having 3-6 months worth of expenses stashed away, you can handle any of those things without the stress. Start small – save 1 month’s worth of expenses, and then keep adding to it.
2) Start Investing Early
We know the “investing” word can be scary, but it doesn’t have to be. No one is telling you that you have to go and invest $10,000 right away; you can start small. Investing early in your 20s allows you to take advantage of compound interest.
For example, if you invest $100 a month at 8%, you can easily see almost $300,000 by retirement age. However, if you start doing that at 30, you’ll only see about $130,000.
You can easily invest by opening a Roth IRA, utilizing your employer’s 401K (which we’ll get into in a second), or choosing a low-cost index fund like the S&P 500. It’s financial resolutions like this that will give you that big pay off.
3) Take Advantage Of Your Company’s 401K
If you aren’t already enrolled in your company’s 401K, make it your biggest financial resolution to sit down and fill out that paperwork. This money is taken out of your paycheck tax free, and you likely won’t even feel it coming out.
Additionally, most employers offer some sort of match – i.e. if you contribute at least 5%, they’ll match each percentage of that. That’s free money! You don’t want to miss out on free money, especially when you’re in your 20s and that free money plus your contribution will just continue to compound.
4) Build And Protect Your Credit Score Early
A good credit score is vital when it comes to big purchases. We’re not just talking about mortgages and home buying which you may not be thinking about right now.
A good credit score can save you money and help you get car loans, rent approvals, and even insurance in some states. You can work on your credit by regularly keeping your credit card utilization to less than 30%. You should always pay off the statement balance of your credit cards in full, too.
5) Avoid Lifestyle Inflation As A Financial Resolution That Will Pay Off
Chances on in your 20s you are going to get a raise. Even going from your intern paycheck to your first big job paycheck will be eye opening; you are going to be tempted to spend more because you are now earning more. But you don’t have to!
It’s financially savvy to keep your lifestyle stable even when your income rises. When you get a raise, if you are able to, increase the percentage that you are saving each month or year. You can still spend it on fun things, but start a “fun budget” so you have a set amount to spend; it’ll help you stay controlled.
6) Pay Attention To Your Student Loans
It is likely you know you have student loans that you’re actively paying, but you may not know exactly how much you have left or how much you have paid. Use a debt tracker or a simple chart to keep track of the progress you make.
Trust us – the mental burden of student loans will be lighter once you see the progress you have made. You should also celebrate mini milestones in your journey to paying off your student loans.
Celebrate when you pay off the first $1K, then celebrate again when you’re at the halfway point. Celebrate when the highest-interest loan is gone, and plan a big celebration for when they’re paid off. This will keep your motivation high.
7) Reduce Your High-Interest Debt Aggressively
Take a look at any credit card debt, student loans, or any other debts you may have. Pay attention to what the interest rate is on those. Whichever debt has the highest interest rate, work on paying that off first.
This will help you avoid pay the fees from the interest. On the flip side, you could pay the smallest debt first if you think it’ll motivate you more by being able to check one debt off your “to pay” list.
8) Talk To A Financial Advisor As A Resolution That Pays Off
Sure, you can get a lot of financial advice on the internet. A lot of it is helpful! But you may want a more personalized plan. Do your research or get a recommendation for a financial advisor.
Many offer complimentary conversations before actually signing on with them. A conversation won’t hurt; it may be a step in the right direction of your financial future.
Final Thoughts on Financial Resolutions That Actually Pay Off
The act of setting and following through on these financially savvy goals will set you on track for a huge future pay off. The more time you wait to get started, the less pay off you get and sometimes by a big amount. Fortunately there are easy options, just pick one of these and start going!
About the Author
Michelle graduated from Fordham University with a Bachelors of Arts '13 and a Master of Arts '14. She's currently working in corporate America with a side of freelance writing. She wants you to learn from her experiences and mistakes so your 20s can be your best decade. When she's not working, she's likely planning her escape to a tropical island.