Here Are Six Financial Lessons You Should Master by Age 30

Becoming money-smart is time-consuming and requires discipline. Nonetheless, this is key to helping you achieve financial security and not live paycheck to paycheck. This article discusses six financial lessons you need to master before reaching 30. Mastering these lessons will allow you to save more and plan for your retirement.

Stick to a Budget

The idea of budgeting has likely crossed your mind at some point if you’re in your 20s. Maybe you have even tried using a budgeting mobile app. However, the difficult part has always been sticking to your budget.

Before you hit 30, mastering the budgeting process is crucial. Every dollar you spend must be accounted for. While it is okay to spend your hard-earned money on fun trips and shopping, you must make sure these expenses fit into your budget.

So, how do you create and stick to a budget? Well, here are some pro tips to consider: First, understand your spending habits and write down all your expenses. Next, identify and cut off unnecessary expenses to ensure the money spent to cover these costs remains within your budget. After determining your expenses, you can choose to save the rest of the funds.

Avoid Spending Your Entire Paycheck

If you speak to any wealthy individual, they are likely to tell you that they did not reach where they are today by squandering their whole monthly paycheck. In fact, according to the author behind the book ” The Millionaire Next Door,” Thomas Stanley, most millionaires usually spend their monthly income modestly.

Stanley discovered that many wealthy individuals lived in cheap houses and drove used cars. He also said people who wore considerably expensive outfits and drove high-end cars lived in debt and that their paychecks couldn’t sustain their expensive lifestyles.

That said, we recommend spending 80% of your monthly income and saving 20% when you get a job. You can keep the 20% in a savings account or invest it in a money market fund. Gradually raise the amount of money to save. The idea is to be able to save 40% of your monthly income.

Identify Your Financial Goals

If you do not have financial goals in your 20s, then it’s high time to start thinking about them. You need to write them down and formulate a plan to achieve them. Remember that each financial goal should have a deadline. For instance, if you want to save to buy a car, determine the period you’ll need to put money aside every month to achieve the required amount. With strict spending habits and a proper saving plan, you stand a chance to make your dream a reality.

Learn About Your Student Loan

Given the massive costs associated with higher education, many students seek loans to finance their stay in college. These loans need to be paid after graduation. Therefore, it is vital to have a clear understanding of the nature of your loan and how to repay it. If you leave your student loan unpaid for long, it accumulates interest, making it difficult to manage.

Understand Your Debt Situation

If you want to attain financial security before reaching your retirement age, understanding your debt situation and sorting it out as soon as possible is key. This allows you to retain enough money as savings. That said, know all your loans and set up a monthly budget to clear them over time. It is always advisable to prioritize loans that attract high interest.

After clearing your debt, it is time to control your credit card spending to avoid accumulating another debt. Ensure you spend an amount you are capable of repaying by the end of the month.

Set Up a Solid Emergency Fund

A lack of an emergency fund makes it easy to dip into your savings. That’s why it is important to put aside some dollars every month to meet emergencies. Financial advisors say a solid emergency fund should equal your three-month salary.