Filed under: Family Money, Personal Finance, Budgeting, Financial Education
1. Aggressively Pay Down Debt
The longer you hold onto debt, of any kind, the longer you keep yourself in shackles that prevent you from working toward your other financial goals.
In your 20s, it can be hard to pay down debt very aggressively; you're often working an entry-level job, struggling just to pay the bills and find your footing. But now that you've settled into your career and gotten some of the preliminaries out of the way, it's time to clear the stage for the rest of your life.
If you have student loan debt, credit card debt or a car loan you're paying off, throw everything you can at paying those balances down pronto. Every extra month you make payments, you're accruing interest and tying up money you could be spending on other goals. Get debt off your back as soon as possible.
2. Revisit Your Budget
You should be reviewing your budget regularly to ensure it's aligned with your priorities. Now's the time to do some serious tweaking to make sure you're budgeting for what matters to you now.
You may have new costs like raising a baby or renovating your first home, while other costs may no longer be relevant.
You may not care as much for eating out or bar-hopping as you used to; perhaps now your favorite weekends might be spent curled up on the couch with your partner or playing with your kids. (Or you might be bar-hopping more than you did at age 22.)
You may start trying out recipes, realize you love cooking and stop relying on takeout to fill you up most nights.
Your budget will only work if you keep it in line with your needs and wants, and when those change, your budget should change with them.
3. Get Specific About Savings
In your 20s, you should be working to build an emergency savings fund and putting money aside toward any short-term goals, like saving to buy a car. As you get older, savings goals emerge that are bigger than anything you've saved up for previously -- like getting married, buying a house, starting a family or building your children's college fund.
Goals this big need a specific game plan, so start including a line in your budget for them. Do your best to estimate how much you'll need for each of these things and when you'll need it by. If you can't quite squeeze saving for these goals into your current budget, you may need to cut other budget areas, find a new income stream or postpone the goal (like buying a house) until you can save up more.
4. Check Your Insurance Coverage
You have more assets, and you may also have more people financially dependent on you. Make sure you have the coverage you need to protect you and your loved ones should the unexpected happen.
This includes health insurance, auto insurance, life insurance and renter's/homeowner's insurance. You may also want to look into disability insurance, which covers if you get injured or fall ill and are unable to work for an extended period.
5. Get Serious About Retirement
As your salary increases over the years, the amount of money you're putting aside toward retirement should also increase. You should be putting away at least 15 percent of your income into accounts like a 401(k) or Roth individual retirement account.
If you receive a raise or move to a new job with a higher salary, bump that percentage up, and consider earmarking any other windfalls for retirement, too. The more money you can put aside now, when you're in your prime and bringing in a steady income, the more secure your retirement will be. Rather than falling prey to lifestyle inflation, use any boosts in income to shore up for the future.
Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 30 countries, owns seven rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who want to ditch the cubicle, shatter limits and live life on your own terms -- while also building wealth, security and freedom.
