6 Financial Tips I Wish I Knew in My 20s

When you are in your 20’s financial planning is a foreign subject most of the time. Most don’t think about their financial future. Most wait until they get to their thirties before they seriously think about investing, savings and financial planning.

1. You don’t have to be rich to invest.

There is a big misconception that only those with a lot of money can invest in bonds, Stocks, real estate etc. This however is not true, for example people can now buy bonds from 3000.

Most 20 something’s do not see the need to invest because it does not guarantee overnight wealth. It takes a while to start seeing good returns. Therefore, instead of seeing investing as a way to get rich you can think of it as a savings plan where you are ensuring your financial success.

READ ALSO >>> 5 Terrible Financial Habits In Your 20s Which Will Make You Poor In Your 30s

2. Save enough for rainy days.

One of the biggest mistakes people in their twenties make is not saving enough. We live day to day thinking tomorrow will take care of itself.

This is a very dangerous mentality because you never know what will happen. If there was an accident, one would end up draining all their other savings and become broke in the end. What you need to do is set aside a different savings account for a rainy day. This is the money you use if you lose your job, get an emergency etc.

3. Don’t buy a car just yet (even if you can afford it).

A car though convenient is not the best thing to buy while you are still in your early 20’s. It is not a very good investment unless you buy one for commercial use.

Cars are depreciating assets, this means that as soon as you drive off with it after purchase, it’s automatically worth less than what you paid. Not only that, but cars are expensive to maintain with fuel, insurance, maintenance etc.

Therefore, you should only buy a car after you have invested and saved enough money to take care of it without jeopardizing your financial future.

SEE ALSO >>> How Much of Your Salary Should You Save Every End Month?

4. Beware of predatory lending.

Not all money lenders have your best interest at heart. In fact they just want to get more money. Therefore before taking a loan you need to ensure that you have viewed all your options and that you go for one that does not have high interest rates.

It is better to borrow from institutions like banks, Sacco’s etc as opposed to borrowing from individuals.

5. Stop spending so much money on socializing.

Like most people in their 20’s I have fallen victim to spending way too much money on outings with my friends.

There is nothing wrong with that but if you are always spending more than 5K every weekend drinking with your friends instead of investing that money in your future then there is a problem.

You may not know it now but later on you will realize that the money could have been put to better use had you invested it. Cutting back on how you spend socializing will tremendously improve your financial future.

6. Debt is very expensive

Before borrowing money, you need to really think it through and see if there are any other means of going about it. It might seem like a good idea at the time but a carelessly though out loan can leave you in more debt than you bargained for.

RELATED ARTICLE >>> 5 Things You Should Never Take A Loan For

For example, it would take you over 3 years to pay off a loan worth 1 million plus interest by making monthly contributions of close to 28K. Before committing to such a decision you need to think about it.

By Michelle Wanjiku

Michelle is a Communication Officer/Digital Marketer at Career Point Kenya.