This year has been a big one for my husband and me in terms of making and reaching financial goals. We’ve been working hard to set ourselves up for success!
There are a lot of big decisions that come up throughout your life that will have long-lasting financial impacts, and many of them seem to hit during your twenties.
As we’ve made some of these decisions during the past year or so, I’ve been thinking about how they will add up and lead you to be financially stable not only in the present but also in the future.
We’ve primarily focused on 8 financial goals this past year, and they all work together well and help our money to work for us, and not the other way around!
While some of these goals might not be right for your current situation, they’re all good goals to work towards that can help you reach your ultimate financial goals.
So let’s get started and talk about 8 of the smartest financial goals you can make in the next year—whether you’re in your twenties or well past them—to set yourself up for success!
Paying off Debt
One of the first financial goals you should work towards is paying off your debts. Whether that’s your student loans, a car loan, or credit card debt.
Paying off your debt doesn’t have the same instant gratification feeling that you get when buying something new, but you will feel relief in the long run when your debts are all manageable.
The more you can pay off now the more you’ll save yourself in interest over the length of your debt, and those savings add up! Plus, the sooner you pay down extra debts the more money you’ll free up in your monthly budget for other wants.
We’ve been putting extra money towards our car payment for the last few months so we can pay it off before moving into our home. That way there will be a little more money in our budget each month to cover the mortgage.
Create a Budget
Budgeting might not sound fun, and to some people people the word is synonymous with financially struggling, but that’s just not the case!
Creating a budget is the best way to keep track of your money and make it work for you. By telling your money where you want it to go, you can set a realistic plan and make sure it gets there.
You’ll start to notice patterns and areas where you can cut back on that you otherwise wouldn’t have noticed. You often hear people talk about cutting back on small daily purchases like a $10 lunch every weekday.
While that doesn’t seem like a lot when you look at one purchase, that adds up to $2600 in a single year. That money could’ve very easily been spent to pay down debt or save for an emergency fund or vacation.
I’m not saying to cut every non-essential purchase out of your life, you get to choose what you want to spend your hard-earned money on. That’s the great thing about budgeting, you get to decide how much to spend and create your financial priorities.
If you’re married, keep in mind that you and your spouse will have different financial priorities and areas where one of you would prefer to splurge and the other might choose to save. Make sure to draft your budget together and reevaluate it every month.
In order to make your budget work, everyone needs to be on board with it!
Build an Emergency Fund
One of the best ways to be more financially stable is to have an emergency fund.
Most emergency funds are 1-3 months of expenses (or more, if desired), and provide a safety cushion for you to live on if needed.
Say you lose your job and are out of work for 2 months, if you have 3 months of expenses in your emergency fund you can still pay for all of your bills and bare minimum monthly expenses to get by until you find work.
The most important thing to note about emergency funds is that they should only be used in the case of a real emergency. Self-control is one of the most important factors in reaching this financial goal.
As we’re building our house this year we’re currently working on saving up a 3-month emergency fund using our projected budget with our mortgage, utilities, and other house-related expenses that we will be adding to our monthly budget once we move in.
Keep in mind when determining your monthly minimum budget for your emergency fund that it will change throughout your life, and you’ll have to adjust the fund’s balance to account for said changes.
Open a High-Yield Savings Account
I don’t know if I missed this chapter during my financial literacy class, but I had no idea that high-yield savings accounts existed.
Before opening this account last month, our emergency fund savings were sitting in a savings account at our bank earning 0.05%. That’s abysmal compared to the 5.15% return from our high-yield savings account (HYSA).
If you deposit $5,000 into each account, the first account will earn 20¢ in a month while the HYSA will earn $21.45. That’s a huge difference!
Within a year you will have earned $263.66 from the HYSA, $261.10 more than the $2.56 earnings from the standard savings account, without contributing any additional money.
Do yourself a favor and open a high-yield savings account, because if you don’t you’re missing out on free money.
Get a Cash Back Credit Card
Another step you can take to make your money work for you is to apply for a cash-back credit card (we love our Chase card, it gets 1.5% cash back on all purchases plus a $200 reward and 5% cash back on gas and grocery for the first year!). Now keep in mind there is one caveat: you have to pay off the credit card in full every month!
If you don’t pay off your credit card bill each month you’ll be paying additional fees and interest, which completely defeats the purpose of getting cash back rewards!
I’d recommend a cash-back card that gives you a standard percentage on all purchases, but there are many credit card types with different reward structures. Just find one that works well with you, your lifestyle, and your financial goals!
Buy a House
Renting is fine and all, but if it’s feasible for you a mortgage can be a great investment!
My husband and I always had a goal of owning a home one day (and actually paying it off).
Saving up for a home will take sacrifices. For you, that might look like financial sacrifices such as saving up for a downpayment or paying off debts to lower your debt-to-income ratio, or sacrificing time and energy by participating in an owner builder program.
Whatever way you go, the path to homeownership isn’t the easiest one, but it’s so worth it!
Open Retirement Accounts
Compound interest is a powerful tool that you should use to your advantage. The best way to use this tool? Give it time.
If your employer offers a retirement match, take it. Otherwise, you’re missing out on free money in your retirement accounts that will grow exponentially over time.
Even with an excellent employer-sponsored plan, opening an additional personal retirement account like a Roth IRA is a great way to save for your future. Especially if you switch jobs, it’s nice to have an account that’s constant and easy to contribute to.
The more money you can save for retirement when you’re young, the more money you’ll accrue in interest and the more comfortable you’ll be during your retirement years.
Get Life Insurance
If you’re anything like me, getting life insurance is one of the last things on your mind. After all, when you’re young and in good health you expect to live for a long time.
My husband, on the other hand, wanted to get life insurance because we’re young and healthy. Life insurance is cheaper to get when you’re younger and in better shape, and it will give you and your spouse peace of mind both now and later, especially if you’re planning on having kids.
Do yourself a favor and get insured now because it will not only save you time when you’re a busy mom or dad, but it will also save you money down the road.
While your twenties might not seem like a critical time in your life in terms of working towards financial goals and preparing for your future, there are countless steps you can take to better your financial future!
So pick a goal or two and start working on it today so your money can work for you and help you create the financial stability that you deserve.
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