Important to invest in your 20s
MONEY MATTERS: DIFFERENT APPROACHES DURING DIFFERENT PHASES OF YOUR LIFE
Do not delay your savings and do not think you will catch up when you earn more money
Financial planning requires a somewhat different approach during different phases of your life. Your 20s are the start of your road map to financial freedom. As such, here are a few tips to start your journey: 1. Plan your budget. This is a plan, not an account of expenses. Decide upfront how much profit you’re prepared to sacrifice for immediate gratification. A budget is useless unless you use it. 2. Plan to pay off all student loans before you buy that dream car, etc. Student loans have an incredible ability to stick around for a long time, earning high interest when you begin your career. Settle them as soon as possible. 3. Become disciplined in saving and investing. Consider investing via a tax-free savings account and contributing to a retirement annuity. 4. Start building your dream machine. Set financial goals and objectives, set realistic time frames (if your expectations are unrealistic you’ll become disillusioned and loose heart) and prioritise. 5. Insurance is very important. Most people are happy to spend R2 500 on insuring their dream car which may have a total value of R250 000, but are reluctant to insure themselves in terms of income protection, disability and dread disease. 6. Build a good credit rating. This is very important especially in SA’s current environment. This will determine the interest rates you’ll be offered on purchases.
Do not think it’s okay to miss a compulsory payment and catch it up the next month. This will negatively impact your credit rating and can even be the cause of you being denied credit. 7. A well-managed credit card where you load money to spend, or a cellphone contact that you service every month, are good ways to show that you are capable of managing your finances. 8. Focus on your health and wellness. This may be the most important money factor where you can make an active decision to address lifestyle issues such as smoking, exercise and diet.
Someone once said: “If now at the age of 42 I could tell my 20-something self anything, it would be to start investing more, as soon as possible.”
Next week: investing in your 30s and 40s.
Claire van Wyk is a Discovery certified financial adviser