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Sure you become a legal adult at 18. But your 20s are when you actually start making real-life decisions that will influence the rest of your life. And frankly, if you play it smart and make good financial decisions you can set yourself up for life.

Here are 10 money decisions you need to make in your 20s so you can chill in your 30s.

1. Start Saving

Retirement is the last thing young people are thinking about. But they should be. You don’t want to spend the rest of your life working. And early in your 20s is the best time to start saving. You aren’t a homeowner, likely don’t have children and have few major expenses beyond food and rent. The money you put into a saving account now – even if it’s just your employer’s 401(k) plan – will double or triple thanks to compound dividends. And you’ll be thankful for it in a few decades.

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2. Invest Wisely

Once you start working and saving you want to make sure you’re investing your money wisely. There are a bunch of investment opportunities available to you. And the internet offers easy access to information about the finer workings of all of them. So make sure you’re not investing all your earnings in one plan. Or focusing on just high-risk investments.

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3. Define your short and long-term goals

These plans do not need to be set in stone. In fact, you’ll probably end up changing and altering them numerous times. But knowing what you want is the first step to working towards it. So define your short and long-term goals. Where do you want to be in one, five, 10, 15 and 20 years? Consider targets like owning cars or property, traveling and wedding costs.

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4. Cash over credit

The worst thing you can do in your 20s is end up in more debt than you absolutely have to. So even if you get a credit card make sure you’re only spending as much as you can pay off in a month’s earnings. And if you don’t think you can do that just stick to cash. You don’t want to ruin your credit history over frivolous expenses.

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5. Learn to budget

Budgeting is the only way to keep track of your expenses. Learn how to draw a clear line between your wants and your needs. And then apply the 60-40 rule where at least 40 percent of your earnings are going into your savings account. Once you’ve done that whatever’s left is yours to enjoy.

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6. Plan for emergencies

To be absolutely clear your savings account is not your emergency fund. This is a mistake most people make. Allow us to clarify. The purpose of having a savings account is to save up for retirement. An emergency fund is generally 4-6 months of living expenses that will come in handy if you are laid off from your job, wreck your car or need to be hospitalized.

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7. Pay off debt

Naturally, you want to start off your adult life with no debt. But most people already have things like student loans and car payment plans lined up. If that is the case then paying off the debt is your number one priority. So after the essential monthly expenses whatever paycheck you have left needs to go directly towards paying off your debt. Every raise, gift voucher, birthday money, Christmas gift – any extra cash you get must be used ruthlessly for this purpose.

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8. Purchase insurance smartly

There are a million different kinds of insurance out there. Sure if you have a car then getting car insurance is the smart thing to do. And renters insurance probably couldn’t hurt. But if you have debt then investing in things like life insurance shouldn’t be a priority in your 20s. You have to prioritize your expenses. And while insurance can wait till you’re in your 30s, student loans can’t.

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9. Spend wisely

Obvious advice – don’t waste money on frivolity.

 

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10. Live according to your pace

Don’t let other people’s expectations influence your spending habits. It is perfectly reasonable to live with your parents if you’re paying off college loans and want to save on rent costs.

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