| When you are in your twenties, you are | | | | accumulation and protection products. When you |
| considered to be a young adult. However, in | | | | are young, it is better to acquire basic medical and |
| terms of financial planning, young adults are babies. | | | | health insurance and nominal life insurance |
| The fundamentals of financial planning are essential | | | | coverage. Young adults are less likely to have |
| to any age group. However, it is important for | | | | huge cash reserves; making financial protection an |
| persons in their twenties to ensure that they build | | | | even more important component of their financial |
| a sound financial foundation and develop good | | | | plans. |
| financial habits as early as possible. Applying seven | | | | 5) Start planning for retirement |
| basic principles of financial planning in your twenties | | | | It is important to start planning for your |
| is critical to the achievement of financial success | | | | retirement as early as possible. No matter what |
| later in life. | | | | your likely retirement age is, it is better to start |
| 1) Develop financial goals | | | | planning in your twenties- and early twenties at |
| As a young adult, managing your own finances is | | | | that. You will give yourself more time to |
| likely to a new realm. In light of this, it is important | | | | accumulate the finances necessary and |
| to set your priorities at this early stage. Failure to | | | | incorporate a long-term approach into your |
| do so would result in poor financial decisions that | | | | financial plan. |
| affect you many years later. As a young person, | | | | 6) Pay yourself first |
| you have to determine what money means to | | | | As a young adult, saving is very important; |
| you. Beyond this, you also have to envision your | | | | especially as you are just developing your cash |
| future and understand the role of your finances in | | | | reserves. Choosing high yield savings accounts and |
| helping you to make your desired future a reality. | | | | automating your monthly savings are just a few |
| Goal-setting is the ideal and proper way to | | | | ways of ensuring that you have something to |
| construct your seminal financial plan. | | | | address contingent expenses. Developing your |
| 2) Develop/ restore and maintain a good credit | | | | own reserves may also reduce your dependence |
| rating | | | | on credit in the future. |
| It is important to avoid handicapping yourself with | | | | 7) Develop a diversified portfolio |
| bad credit when you are in you twenties. If you | | | | Saving is just part of wealth accumulation that |
| have a bad credit rating (and this advice came | | | | deals with putting aside for a future need. |
| too late), you should aim to eliminate debt in the | | | | Investing is based on the concept of capital |
| shortest period of time. Using loans for necessities | | | | growth. In your twenties, you have the longest |
| only and avoiding excessive credit card purchases | | | | investment horizon (considering life expectancy). |
| can help you to manage your debt. It is also vital | | | | Therefore, it is important to allocate a portion of |
| to ensure that all of your loan payments (including | | | | your wealth to capital growth. Diversifying your |
| student loans) are paid on time. | | | | portfolio is critical to maintaining a balance |
| 3) Create a budget and exercise financial discipline | | | | between risk and return as well. In your twenties, |
| Developing a budget is a good practice because it | | | | it is recommended that you have 60% to 80% |
| helps you to predetermine your spending and | | | | of your portfolio in growth assets- depending on |
| other allocations. Budgeting helps you to manage | | | | your risk tolerance. |
| your finances as well as reinforcing other | | | | Financial planning in your twenties is all about |
| elements of your financial plan. More important | | | | getting a proper start to your financial plan. It is |
| than creating the budget is exercising the discipline | | | | also about avoiding common financial mistakes |
| to stick to your budget. Developing financial | | | | early in your life. Undertaking financial planning in |
| discipline will be critical in determining how fast you | | | | your twenties ensures that you do not face your |
| can achieve financial independence. | | | | future with a handicap. Instead, it inculcates good |
| 4) Acquire adequate financial protection | | | | habits and helps you to develop a portfolio that |
| Financial planning must begin with a proper | | | | will help you to live the life that you dream about |
| foundation. A financial plan is divided into | | | | sooner instead of later. |