You’re in your 20s, fresh out of college, ready to take on the world. Aside from finally being free of the education system, you’re delighted by the idea of financial independence. All the money you earn gets to go in your pocket! Right...? The reality of the situation is a little more complex. We’ve written an article on five lessons that can guide you through the beginning of your financial journey. Think of it as a tutorial on avoiding the most common pitfalls and investing in your future. The 50-30-20 Rule Intended to help you develop a healthy relationship towards money, the 50/30/20 rule has a simple execution. 50% should go to needs: utilities, food and other bills; 30% should go to wants: fun, outings, shopping, trips (optional); And 20% should be saved up, invested or paid off. Of course, this rule is better followed as a guideline on income distribution, since life circumstances vary. Some have families to support, others have less than comfortable income, or don’t have a full-time job, or have college debts, etc. Naturally, this guideline will have to be adapted month by month. Invest in low-risk stocks It’s crucial to start investing money in your 20s, as research shows that you could see greater returns by retirement age than if you started in your 30s. Investing even as low as $10 a month to low-risk yet stable stocks (take Coca Cola, for example), is a good way to see passive income growth over a longer period. Emergency Funds Can Save Your Hide An emergency fund, “Rainy Day” money, your financial safety blanket – whatever name it holds, this financial strategy will get you out of many tight situations. Unpredictable situations can often cost more than you anticipated: car breaks down, your tooth breaks, the fridge suddenly dies on you... Unfortunately, many people will find themselves borrowing money either from family or friends, or applying for credit. It’s something you don’t want to do, unless you want to lock yourself into paying off large debts. Remember, it’s all about your present self taking care of your future self. A Stable Job is Half the Battle While it’s really important to switch jobs until you find the one that will make you happy, you’ll want to settle in somewhere for a few years. And it should be a company that provides more than just the basics. Part of becoming a grown woman is in realising that only you can take the best care of yourself. And that starts with a job that offers everything you’ll need to set up a financially secure life. You’ll want to find a company that has a full retirement plan , health and dental insurance, and paid days off. A lot of financial burden will be taken off your shoulders in this way, and allow you to make a good saving and investment strategy. Prepare for the Future You Want It’s important to have a financial goal to strive for. And we’re not talking “I want to earn X amount of money”. It’s about accumulating your savings for a specific thing down the line. Take the following three, for example: · Opening a business It’s no small feat to start your own company. It takes a lot of preparation, planning, and skill to tackle something so demanding. You’ll have to invest in building a product, distribution, marketing, possibly hiring employees, buying a domain, and more. It’s good to put down on paper everything you’ll need, and how much starting money you have to have in order to successfully kick things off the ground. · Kids A few years back, there was a report that stated that American parents needed to set aside roughly $250,000 to raise a child until it’s 18. By now, the number has definitely gone up. And while we can’t always count on our plans and expectations on when we’ll get married or have kids, money is well under our control. A savings plan made now will certainly benefit your child-raising expenses later. Think of all the diapers, food, clothes, toys and books. While even hefty savings can’t cover everything, they are a great head start. · House If you’re living with roommates in your 20s, or at your parent’s place, you’ve surely fantasised about ditching everything and living on your own. At least once. Whether you want to be a property owner, or rent a place, it’s smart to plan ahead. How expensive are properties in certain parts of town? What about commuting? Will you be able to put a down payment on your dream house, and how can you pay it off in less than 30 years? All of these are questions you should start answering now. In the End Seeing how your employer signs off your paycheck, technically, your financial security is in his or her hands. However, you don’t have to be dependent on anyone if you learn how to play the financial game. We hope the tips above helped direct you in making smarter, more informed choices. Simply remember that small time and money investments now can lead to big payoffs in the future.