Wondering what smart money moves you can make while you’re young? For many, the answer will be as simple as stuffing some cash away in a savings account. That’s always a smart move, and it is indeed one of the best things you can do in your 20s and 30s to please your future self. But if that’s the only thing you’re doing, then you’re not setting yourself up for much financial security a few decades down the line.
40-year-old you will bemoan the 20 and 30-year-old versions for their lack of financial foresight. It means you’ll have to start being more financially clever in your forties – and 50/60-year-old you will look back and wish you started making smarter money moves a lot earlier.
The sooner you start taking care of your money, the less you’ll have to worry about in the future. With that in mind, let’s look at the smartest money moves to make in your 20s and 30s so all future versions of yourself are happy and smug.
Start Building a Credit Score
Credit scores are the foundation for almost every big purchase in life. From buying a home to getting a new car, companies will check your credit score to see if you’re “worthy”. Now, that sounds super serious – almost like you’re a gladiator staring up at the emperor, waiting for a thumbs up or down – but credit scores are simple.
Your score is a reflection of your past financial habits; it looks at things like:
- How many loans/credit you currently have
- Your track record of paying for things on time
- Whether or not you’re constantly enquiring about borrowing money
Having a low credit score means you’re not going to have it easy. Renting apartments or obtaining a mortgage loan will be challenging because you seem financially untrustworthy. Start building a good credit score in your 20s and 30s is one of many smart money moves so you don’t run into these problems. Three simple tips will help you on your way:
- Avoid borrowing lots of money
- Always pay for things on time
- Get a credit card and pay the full bill every month – this is the best way to “build credit”
With regards to the credit card tip, be careful! You should use your card and set up a direct debit for your phone bill every month, then pay your credit card balance in full. It’s the easiest way to show you’re creditworthy without incurring credit card debt.
Set Up a Retirement Plan Immediately
You’re in your 20s/30s, which means you’ve only just dipped your toe into the world of full-time work. It’s actually crazy to think that a 30-year-old could be working for a decade, yet still have another three or so decades ahead of them before retirement.
Following that trail of thought, it’s completely natural to neglect your retirement when you’re this young. Speaking from experience, this is something you’ll regret with a burning passion. Keep your retirement in mind from the moment you start a proper job. Does this mean you’re crossing the days off a calendar? No! But you need to set up a retirement plan so you can tuck money away for the future.
Thankfully, full-time employers should help you with this by providing some sort of pension scheme through your job. Most likely, you’ll have a 401(k) set up in your name. Any retirement fund is better than no retirement fund – just make sure you set one up. These smart money moves will enable you to build wealth for as long as possible.
Craft an Estate Plan
If you’re not thinking about your retirement, then you’re most certainly not looking further ahead to what happens when you leave this life behind. Everyone dies. That’s a cold, hard, brutal fact of life, and there’s no way to avoid it. You might not think about it now, but estate planning ensures all of your finances and assets are in order when you pass away. It makes everything easier for your family and guarantees that they get all the money and investments you work hard for throughout your life.
Regardless of how young you are or how good your health is, you should consult with estate planning attorneys to draft something up. People think this is something you only need to do when you’re dying or seriously ill, but that’s not the case at all. Take care of your estate in your 20s/30s, and it gives you less to worry about when you get older.
Make Long-Term Investments
An investment can help you make money if you stick with it for many years. While this absolutely isn’t professional financial advice, it’s generally not smart money moves to make high-risk investments when you’re young. You might get lucky, sure, but too many young people lose money because they start forex trading or try to earn a quick buck on the stock market.
It is normally much wiser to do the opposite and seek low-risk investments with a large long-term return. How can you find these? Speak to a proper financial advisor instead of looking for tips and tricks from people online! Financial advisors are qualified to look at your money and pinpoint the best investment strategies for you and your goals.
Keep in mind that you won’t see many gains from long-term investments within even a year or two. They’re the type of investments you sit on for decades until you cash out and realize you made double or triple the initial investment. As you can imagine, future you will be an extremely happy person.
Invest in Your Career
The earlier years of adulthood are primed for investing in your career. Ironically, this is technically an example of a long-term investment. Don’t be afraid to spend money on worthwhile things, such as:
- Online courses
- Higher educational diplomas
- Training schemes
There’s no better way of ensuring financial stability than by having a good amount of income. Investing in your career means you grow as a person and develop more skills to be able to apply for better jobs or secure promotions. You also give yourself more skills and talents to help you pivot later in life to different jobs if you hate yours. It’s something you’ll be grateful for in the future, even if spending money on education and learning feels like a struggle right now.
Make a Budget To Help You Save
It’s much easier to make smart money moves when you grow up doing smart things. For example, it’s hard to suddenly create a budget later in life and attempt to stick to it. However, if you’ve been following budgets since your 20s, then it’s second nature.
Look at your financial situation and make a budget based on your income and outgoings. Everyone’s budget can be different, though most experts recommend the 50/30/20 rule:
- 50% of your income goes on essential needs
- 30% of your income is for your non-essential wants
- 20% of your income is for savings and investments
You basically want to make a budget that ensures you always pay for the essentials (food, bills, etc.) and have enough money left to set aside for savings and investments. Obviously, this means you can increase your savings by learning how to reduce the amount you spend on essentials or “wants” – which brings us to the next point.
Get Out Of The “Spend, Spend, Spend” Mindset
It’s too easy to slip into the mindset of spending money as soon as you get it, especially when you’re young and might have just found your first job. You feel financially invincible, so you splash the cash on everything you want without thinking further ahead. If you have money left after paying for bills, that doesn’t mean you need to spend it all.
Get out of this bad mindset and make smart money moves by focusing on buying what you need.
You’ll learn very quickly that you don’t need half of the things you want to buy in life. You can live happily and enjoy yourself without spending a fortune – which gives you plenty of money left in your budget to put into an emergency fund, savings accounts, and investments.
Never Take On Short-Term Loans
Cast your mind back to the very first point in this post about credit scores. One of the tips to build credit is to avoid borrowing lots of money, which links directly to this point about short-term loans.
A short-term loan is a loan that has to be paid back quickly and tends to have absurdly high interest rates. They’re sometimes called payday loans, and you need to avoid them at all costs. On the surface, they look like handy financial tools to help you borrow money in a pinch, but they result in massive debt repayments that lead into a terrible debt spiral.
Some loans in life are important and helpful (like a mortgage or a personal loan), but never ever take on short-term loans. Your future self will praise you for this genius foresight, as they don’t have to deal with insurmountable debt.
There you go; eight smart money moves to make in your 20s and 30s that your future self will be thankful for. It’s never too late to start being more money conscious, but developing good habits from an earlier age will give you one less thing to worry about in your hectic life.
