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When I was in my early 20s, it never occurred to me to get financial advice, let alone planning for my financial future.
If I knew what I know now about personal finance and investment, I would definitely do things differently.
But, I cannot travel back in time.
So, I hope by sharing what I have learnt, you can avoid making the same mistakes and create a better financial future for yourself.
Pay Off All Debt ASAP
Most young adults have some form of debt to pay off, either study loan or credit card loan or both.
Instead of working butt off every day to make the bank rich, you should make a debt repayment plan to pay off all your debt as soon as you can.
It not only can save you a lot on interest payment, but it also gives you a fresh financial start.
If you are prone to getting yourself into credit card debt, it might be time for you to cut all your credit cards and switch to debit cards instead.
It’s a bit extreme, but it works for the less disciplined.
Invest Early
Being young, you have a lot of time ahead. You should use this to your advantage and start investing early.
Let me explain why.
When you invest early, you can make full use of the compounding effect.
With the help of compounding, small consistent investment over a long period of time can give you mind-blowing returns.
Below is a graph that shows the power of compounding.
From the graph, you can see that Susan would have more money than Bill at the age of 65 even though Susan invests much less money than Bill(only one third of what Bill has invested in total).
This is all because Susan started investing 10 years earlier than Bill.
Related: How To Make Money In Stock Market: A Step-By-Step Guide
Be Frugal
There are two types of people in this world, those who want instant gratification and those who go for delayed gratification.
What is the difference between these two kinds of people?
The former is only concerned about the short term while the latter is thinking about the long term.
For example, the former would buy an expensive car while the latter might just take the subway and invest the car money to grow it.
The former might be dining out almost every day while the latter could be cooking at home most of the time.
When you choose to spend less and aggressively save as much as you can, you are looking to reap the benefits of early retirement and financial freedom.
Start A Business On The Side
Even if you love your job, it’s still a good idea to start a business on the side.
Why?
First, trading your time for money is never going to make you a lot of money. When you stop working, money stops coming in. There is also a limit as to how much you can make because you can’t be working all the time and all your life.
Second, when you own a profitable business, you can still make money regardless you are working or not.
Third, it’s important for you to know that there is no such thing as job security. Your boss can let you go at any time. Having a side business can protect yourself in case you lose your job.
If you don’t like working at a 9 to 5 job and would like to have more freedom, then starting an online business on the side is your perfect solution.
Earn Extra Income
When you are just starting work in your 20s, you would probably not be making a lot of money yet.
If you need to pay for your student loan, rent, and other bills, you wouldn’t have much left from your salary every month.
The good news is that there are many ways to earn extra money even if you are working full time.
For example, you can do freelancing on the side. If you are good at photography, you can offer photography services to people.
If you can design websites, you can offer website design services to businesses who want to have an online presence.
What if you don’t have any skill that can be turned into a service that is already in demand?
A few years ago, I started my own online business offering graphic design services to businesses.
The interesting part is that I didn’t have any graphic design skills.
What I did was that I found a group of talented freelancers online from platforms such as Fiverr, and asked them to work with me because I always have projects that I want to outsource.
The freelancers need work.
And I need talented people to deliver the work for my clients. It is a win-win situation.
So, if you don’t want to sell your own skills or don’t have the time to deliver the services yourself, you can consider Service Arbitrage.
Want My FREE Blueprint: A Step-by-Step Guide On How You Can Start A $1,000/Month Service Arbitrage Business?
In fact, you can check out this comprehensive list of ways to make extra money.
With the extra money, you can pay off your loan faster and sooner.
You can also invest it and let your money work hard for you.
Develop A Marketable Skill
When you are young, it is important for you to develop a marketable skill and become an expert in one area.
For example, you can hone up your writing skills and become a sought-after writer in a particular niche(e.g. business writing).
Or, you can continue to improve your social media marketing skills and become a marketing expert in a certain niche(e.g. Facebook marketing)
Why do you want to specialize in one single field?
Because the more specific your skill is, the more you get paid.
Let me give you an analogy.
Who do you think would make more money, a general physician or a specialist?
Obviously, the specialist.
So, it is always a good idea to become really good at one thing.
With a marketable skill, you don’t have to worry about money because you know you can always make a living from selling your skills and expertise.
Most importantly, a skill you have acquired stays with you for life. That means you can make money from it for life.
Get Health Insurance
One of the signs that you are officially an adult is that you are being approached by insurance agents to buy insurance plans.
The single most important insurance you should get is a good health insurance plan.
Just imagine if you fall sick and get smashed with a huge medical bill. Without health insurance, these sudden enormous medical expenses can wipe out most, if not all, of your wealth. And it could set you back years from achieving your financial goals.
Read More Personal Finance Books
When was the last time you read a book? The best way to improve yourself and your financial future is to read more and learn from people who know more than you.
If you want to become a millionaire, there are a lot of books about how some people made their millions.
If you want to invest better and grow your money fast, read books about how investment gurus like Warren Buffet invest their money.
Tony Robbins once said, “If you want to be successful, find someone who has achieved the results you want and copy what they do and you will achieve the same results.”
Lastly but most importantly, you need to be aware that your money decisions might be criticized or judged just because it is different from what other people are doing with their money.
When that happens, you must know that you are the one living your life and not them.
It takes courage and determination to be different and to do what you believe is right for your financial future.
Wish I read this when I was in my early 20s. The thing I regret most is that I never plan properly finance wise. Well, I guess starting later is still better than never started at all:)