When it comes to money, there is always more to learn. The truth is that no one,
especially in their 20s knows everything about money. At this point in their lives,
young adults could use all the financial advice available. So, are you in your twenties or older?
Do you want to learn the harsh realities of money? If yes, then sit back and watch this video to the
end as I share a few hard truths about money that everyone wishes they knew in their 20s.
Before I get to the good stuff, please remember to hit that like button and
subscribe to this channel if you haven’t. With that said, let us get to our topic of the day.
Everyone, no matter how old they are or how much money they have, needs to know
how to handle money. When you're young, you have a lot of freedom, yet if you spend your
money irresponsibly, that freedom may wind up costing you a lot of money. That means that the
money choices you make when you're young can affect you for a long time. That's why it's
important to start good money habits in your twenties so you can benefit from them later.
But then again, your twenties aren't exactly easy, particularly when it comes to money. At 20, you're
probably financially independent for the first time in your life, with fewer responsibilities
and disposable income to spend whenever you want. However, the danger comes in when you
are clueless about the fundamentals of personal finance because you were never taught in school.
The fact of the matter is, managing your money does not have to be complicated. In fact,
creating a solid financial foundation for your later years may be simpler than you think. All
you need to do is learn the basics of personal finance that you can apply,
such as; developing good spending and saving habits,
learning how to invest and budget, and so on. The end objective is to stay away from debt
that isn't essential and take advantage of compound interest to build wealth over time.
So, here is a list of 5 hard truths about money that everyone wishes they knew in
their 20s. And if you're in your twenties or older, take advantage of this video and learn
a few hacks that will help you improve your financial situation in the future.
Here we go!
Number 1: Budgeting is Key
When it comes to your income, one of the first hard lessons you'll learn is When it comes to
your income, one of the first hard lessons you'll learn is that if you don't plan for your money,
life will. And not in a good way! To avoid such unpleasant surprises, you need to learn
how to budget. Budgeting is key, and it will help you learn how to live within your means.
Getting your financial house in order is as simple as understanding the fundamentals of
money management, such as how to save, invest, avoid debt traps and budget, among others.
A budget makes it easy for you to create a strategy for meeting your goals and specific
targets. It also helps you allocate resources and decrease waste, enabling you to live the
life you want. And on top of that, it helps you maintain a record of where your money has gone,
and with this info, you can make better decisions about where it should go in the future.
If all this sound good to you, here's how you go about it.
To start off, you can make a new budget each month and decide where you want your money
to go. It may be frightening to learn and see how much you actually spend. However,
if you pay no heed to your spending, you will
eventually find yourself living paycheck to paycheck without even realizing it.
Of course, the first few months of budgeting will not be easy. But you must understand that not
being perfect at it is normal and part of the learning process. Like anything else in life,
if you want to get better at something, you must practice. The more you practice,
the more you learn about your expenses, motivation and how to manage your income.
However, all this starts with creating a budget to determine whether you have an income problem or
bad spending habits. Once you've identified your areas of weakness,
you can make various positive financial changes to boost your cash flow.
Number 2: You Need an Emergency Fund
A recent survey of younger and older Americans revealed that 50% had less
than $500 in the bank or no emergency savings fund at all. This is pretty astonishing news!
One of the main money lessons you ought to learn in your twenties is that you
need an emergency fund. Accidents, medical emergencies, loss of a loved one, unemployment,
and emergency home repairs are all examples of unexpected financial emergencies. These
unforeseen bills, no matter how large or small, always seem to arrive at the most
inconvenient times. Correct me if I'm wrong. That’s why you need an emergency fund. It's
one of the best ways to protect yourself from such situations. It's also one of the simplest
ways to begin saving. Setting aside even a small amount of money for these unexpected
expenses can help you recover faster and get back on track with your important savings goals.
Saving money for an emergency fund in your twenties can be difficult, especially when money
is tight. But one thing that can make it easier for you is to be specific about the expenses you
need the emergency fund to cover. This will give you a clear guide on how much money to set aside.
Research indicates that people who struggle to recuperate from a financial crisis often have
fewer money reserves to protect them from future emergencies. Hence they rely on credit cards or
take out loans, usually at high interest, which leads to debt that may be harder to repay. So,
do not let this be your reality. Instead, start up an emergency fund as soon as you can.
Number 3: Paying off debt builds a good credit score
Whether it's medical bills, credit card debt, or student loans, you must understand that debt does
not go away on its own. You'll need to come up with a plan to get yourself out of this situation.
The longer you wait to pay off your debt, the more money you’ll owe due to interest charges.
If you don't pay back your loans on time, it could hurt your credit score and make it
harder for you to get bigger personal loans in the future. So, how do you fix this?
Before you start planning, you need to figure out who, and how much you owe before you start
planning. Prepare a list of all of your debts, no matter how small, including the unpaid balance,
interest rate, and due dates for each creditor. Having a thorough understanding of your payment
responsibilities will help you prioritize and figure out the best payment method to use.
Secondly, try to increase your monthly payments if you can. Paying more than the required minimum
amount could help you save money on interest throughout the duration of the loan you'll
be able to pay off your debt faster because you'll be making more payments each month.
Review your monthly budget to see how much you can afford to pay. Then, set up automatic transfers
so that when money land in your bank account, you can make frequent and gradual repayments.
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Number 4: Save for retirement
In your 20s, putting money aside for a retirement fund may not be at the top
of your financial priority list. Yet, if you want to be successful in the long run,
you need start putting money away for your retirement as soon as you get your first job.
When it comes to saving money for retirement,
it's best to start early so that you can take advantage of the power of compound
interest. With compounding, you can save a little now and earn a lot in the future.
Let me give you a simple example of the incredible power of compound interest. Assuming two people,
one a 26-year-old, and two a 35-year-old, who both plan to retire at age 65.
The first person, the 26-year- old, starting investing $2,000 per year,
for ten strait years, then stopped at the age of 36.
The second person, the 35-year-old started investing $2,000 per year for 30 years!
Now here's the mind-blowing news: the first person, who only invested for 10 years at the
age of 65, had more money than the second person, who invested the same amount as the first person
but for 30 years! That's three times more than the first guy, yet he had less money.
That, my friends, is the power of compound interest. Essentially,
the person who began saving earlier will make more money than the one who started
later. This is because when you start saving early, your money has more time to compound.
Therefore, when negotiating your compensation package, you should consider asking for this
job perk. However, if your employer does not offer a 401(k), or if you are self-employed,
there are alternative retirement plans to consider. A good target to work toward is to set
aside 15% of your income for retirement savings. If you are unable to commit this much right away,
don't worry. You can work up to it as your income grows and your debts are paid off.
Number 5: You don’t need a lot of money to invest
Once you've paid off your debts and set up an emergency fund,
you should now think about how to make your money grow.
In your 20s, it’s hard to imagine what your life will be like in a few years. However,
this is the perfect time to invest in an asset. When it comes to personal finance
and making investments, it is extremely important to build a foundation for your
future while you are still young. By wisely distributing your surplus income,
you can accumulate wealth and the free will to live the life you’ve always wanted.
However, before you think of investing, you need to first improve your financial
literacy. Then you can apply it. To achieve this, you must actively seek resources that
teach you about the various asset classes to invest in, risk assessment, asset allocation,
and how to improve your capacity to obtain the principal amounts needed to make investments.
As a young professional, you have the advantage of time. Therefore, you can take
big risks and easily recover from any possible losses, unlike someone over the age of 40.
While learning and applying investing skills, keep in mind that you should look beyond basic
investment products. For example, you could place your emergency savings in a savings account or
join a savings group to improve your chances of qualifying for large personal loans when needed.
Like I mentioned earlier, investing increases the value of your assets
after a while. When you invest, you put your money into investments like stocks,
bonds, collective investment schemes, and real estate, among others. While
all investment opportunities involve some level of risk, diversifying your assets
shields you from market fluctuations and even potentially disastrous losses.
Nevertheless, you are never too young to invest. In fact, the younger you are,
the better your chances are if you follow the right advice.
Honestly, it’s not easy to achieve any kind of balance in your 20’s. It definitely requires
some time for you to figure things out. Hopefully, the money lessons in this
video will serve as a starting point for you to achieve financial freedom now and in the future.
Now I have a question for you, did you identify with any of the hard truths about money I
mentioned in this video? And, are there others you believe we should have included? Please share your
thoughts and experiences in the comment section below. I am looking forward to hearing from you.
Well, thank you so much for watching, like and subscribe if you haven't. With that said,
have a great day, and I'll see you in the next one.