3 - 5 minute read
As young adults, we often focus on building our careers and pursuing higher education. However, it is equally important to build a solid financial foundation in your 20s and 30s. In this Forbes-style article, we will discuss how much money you need to save by every age and provide tips on how to build good financial habits.
According to a recent study, the median net worth of young adults in the US between the ages of 25 to 29 is approximately $7,500. This is because many young adults have started their careers and are still paying off student loans or other financial obligations. However, it is crucial to build good financial habits in your 20s to ensure a stable financial future.
One of the most important habits to develop is saving 10 to 15% of your pre-tax income. This money can be used for emergencies, a down payment on a house, or building a stock portfolio outside of your retirement plan. It is essential to avoid overspending, which can be a major temptation for young adults who are beginning to earn a decent amount of income.
Tips for Building Good Financial Habits in Your 20s
Creating a budget is another crucial habit to develop in your 20s. By reviewing your budget every month, you can understand your income, monthly passive income from dividends, interest, and investments, and your expenses. Budgeting also helps you understand your spending habits and where you might be overspending. By reviewing your budget on a monthly basis, you can adjust your spending habits and ensure that you have more money coming in than going out.
It is also essential to pay off high-interest debts, especially credit cards, as soon as possible. Investing in the stock market or other investments should not be a priority if you have high-interest debts. Instead, focus on paying down your credit card balance.
Take Advantage of Retirement Plans
If your employer offers a retirement plan at work, such as a 401k or 403b, take advantage of matching contributions. This is free money that can help you build a solid retirement fund. Additionally, consider setting up a Roth IRA outside of your workplace retirement plan, which allows all the money in the account to be tax-free when you take it out at retirement.
As you enter your 30s, it is essential to build on the financial habits you developed in your 20s. The median net worth of people between the ages of 30 to 34 is $36,000, and between the ages of 35 to 39 is $56,000. However, keep in mind that these numbers are based on median household figures and not individuals.
Building a solid financial foundation in your 20s and 30s can ensure a stable financial future. By saving, creating a budget, paying off high-interest debts, and taking advantage of retirement plans, you can build good financial habits that will benefit you in the long run.
The Bottom Line
Developing good financial habits in your 20s and 30s is crucial for building a solid financial foundation. By saving, creating a budget, paying off high-interest debts, and taking advantage of retirement plans, you can ensure a stable financial future.