10 Things I Wish I Knew about Finance in My 20’s
Your 20s can be an amazing time. You’re young, full of ambition, and probably don’t have too much responsibility to worry about just yet. However, despite all the freedom you can enjoy during this early stage of your life, it’s important to remember that there are financial concerns to consider if you want to prepare for a successful future.
While we all like to tell ourselves that we’re financially savvy, the truth is that none of us really want to admit that we can all be a little careless with our money. Since cash is crucial to just about everything you do, it’s time to make sure that you know these 10 finance facts, that could help you to get more out of your 20s.
1. Anyone Can Invest
A lot of people believe that only people who have huge amounts of money can afford to invest in mutual funds and stocks. In fact, some studies suggest that only one in three millennials bother with investments. Although you might not get rich overnight on the stock market during your 20s, you can still invest if you don’t have much extra income.
2. It’s Easy to Get into Debt (But Not to Get Out)
We all know that getting into debt is a piece of cake – unfortunately, getting out of a financial hole isn’t quite as simple. Even paying off a small amount of debt can take years thanks to things like interest and APR. In other words, getting into debt is expensive. Before you purchase anything, you should think carefully about what you’re getting yourself into.
3. Know How to Use Your Credit Card
Credit cards can seem like incredible things. You get to spend all the money you want – without actually having that cash in your checking account. However, the truth is that you shouldn’t be using your credit card for everything from gas, to entertainment, and clothes. While using your card is a good way to build your credit score, it’s important to make sure that you’re using a budget and sticking to it carefully.
4. Make Sure You Have Savings
About 72% of Millennials have less than £1,000 in rainy-day savings. That’s pretty worrying when you consider how quickly that money can be used in the event of a disaster. To make sure you’re prepared for the worst, try setting aside a little money from every paycheck that you can rely on as a safety blanket when things go wrong.
5. Tell Credit Bureaus about Your Rent
According to experts, almost every major credit bureau will allow you to report your rental information. While less than 1 percent of all files in credit agencies contain rental information, sharing yours could help you to improve your credit score dramatically.
6. Try to Build Your Credit
Your credit score is your golden ticket to financial freedom as an adult, so make sure you use it however you can. There are plenty of ways that you can build your credit, including using credit cards and setting up direct debits. It’s never too early to think about improving your score.
7. Avoid Predatory Loans
Predatory loans might seem like the only option in a dangerous situation, but they can often destroy your financial status. With the average interest rate for these loans measuring at about 400%, you’ll find yourself struggling to pay back even the smallest of loans. Exhaust all of your other resources before you take this route.
8. Stop Inquiring
A lot of people don’t realize that credit inquiries can easily damage their credit score, docking huge numbers off your overall rating. The rule of thumb to keeping your score safe is to shop around when it comes to purchasing something that you need to get on credit. Don’t inquire until you’re certain.
9. Don’t Buy a Car Immediately
Even if you can afford to buy a car this minute, that doesn’t mean that it’s the right investment for you. Cars are depreciating assets which begin to lose their value the minute you get behind the wheel. At the same time, unexpected maintenance and expenses are going to cost you over time. Think carefully about whether you really need a car before handing over your money.
10. Cut the Social Spend
Finally, while it’s tempting to spend lots of money on going out and having fun with your friends while you’re still young, try not to go too wild. Cutting back on your spending is a great way to save money for the things that really matter in the long run.
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