8 ways to prepare for financial freedom in your 20s
Being in your twenties is one of the most important stages in your life, especially in determining your financial trajectory. One sure thing about financial freedom is that no one ever trips over it, you have to plan and be intentional about it.
Mismanaging your 20s could lead you to a wild ride that you might never get over, especially after starting a family.
While it can be very difficult to become financially free in your 20s, it is your responsibility to make sure you are on the right track. How do you do this? Just browse our list of 8 ways to prepare for financial freedom in your 20s, below.
Remember, too, that this is a process. Unless you hit a jackpot and invent a product that goes viral around the world in your 20s, you have to go through the process. And even if you land a jackpot, financial prudence is still necessary for growth and sustenance. Look around you, there are many examples of individuals who were once millionaires or billionaires, but now declared bankrupt. This should tell you something.
8 ways to prepare for financial freedom in your 20s
1. Draw a plan for the future: Financial freedom is a goal. Just like the other accomplishments that you have planned to accomplish at any given time, you must perceive it as something that you must achieve. The first step in drawing a plan is to have an idea of what it would look like. Likewise, the same concept applies here; focus on your plan and draw it. Set the milestones that you plan to achieve and set the dates by which you plan to reach them. The path to financial freedom involves these key factors; identify them and you are on your way to becoming a financially independent 20 year old. Remember, nothing perfect is created without an initial plan in place. Faraday not only woke up one morning and created electricity with the snap of a finger, it took countless hours of planning to invent the greatest element used by humans.
2. Understand the investment and leverage your knowledge about it: Of course, that could have just said; “Invest more often” or “Start investing”, but people tend to read these articles and act solely on the words of the article, rather than what the words imply as well. Investing is good, and even better, do it more often, but it’s important to note that it’s not something to be done out of the blue. You have to read and study to understand how to play your cards well by investing.
After studying the art of investing, you can move on to the next phase; build on your newly acquired knowledge. Invest wisely in places where you are sure to get a high return. Do them in different places, and in no time you will be able to pump up your chest and do “yanga” to those friends who said; “You are young, spend your money and chop life.” We’ve all had these kinds of friends. Be wise, make smart investments, and strive for financial freedom in your 20s.
3. Find a financial planner: The importance of this step cannot be underestimated. While some try to gain financial freedom on their own, many turn to financial planners to help them achieve this feat. A financial planner will help you create detailed and useful financial forecasts that will let you know what you have been up to financially and how it affects your financial forecast. In some cases, they could also advise you on the best financially oriented actions to take to achieve the best results in your financial forecast. Your goal is to be financially independent in your 20s, great! Set a forecast that dates back to the time you set, and you can get a rough idea of what your financial situation would look like that year.
If you’re curious about what a heavily reiterated “financial forecast” would deal with, it describes financial risk management, investment planning, cash flow management, insurance planning, tax planning, income planning. business succession and more.
4. Filter needs from wants: If you are thinking of achieving financial freedom in your twenties, you must learn to identify what you “need” and what you “want” out of simple interest. This is not only a key step towards financial freedom, but also towards adulthood. Needs in this context do not necessarily mean “basic human needs” such as food or shelter. A need is what’s exclusively crucial for you right now, which is worth spending the money on. From this definition, you can most likely conclude what the “wants” would be. When trying to make a purchase, always ask yourself if you need it urgently or think about the benefits of getting it; do they outweigh the disadvantages of not having it?
No matter how convincing this seller is, don’t let them convince you to buy what you don’t need. Spending on necessary things gives you financial freedom, and that’s a long-term ideology in adulthood.
5. Don’t rush, patience is key: “Click here to make millions like this sharp guy from Lagos.” or “Invest 20,000 to get 100,000 in a week”. Here’s a tip; work towards your goal of financial freedom, but know that it won’t be easy – nothing good is easy. Be patient, don’t go into schemes and scams thinking they are smart investments. Point number 2: Understand investing and leverage your knowledge about it. There is no quick way to “get rich” or “double your investment in 24 hours”. Most of these plans rely on paying you with other people’s money, and ultimately many lose and only a few benefits. Keep in mind that wealth grows and accumulates over a long period of time, so be patient and disciplined enough to make it happen.
6. Do not guarantee loans that you are not sure to repay: Seek out loans when needed and in doing so make sure you can repay them. For example, the debt you incur to finance higher education should not exceed your expected income. Don’t borrow money you can’t repay, and always consider the interest rate on the debt. The last thing you want to do is be the person who wants financial freedom but has a lot of debt to pay off. To move forward, you must be debt free. Mark Cuban once said; “The best investment is to pay off your debt.”
7. Be a businessman, negotiate: Don’t be the person who always accepts the seller’s asking price, nor should you be the type of person who says “I don’t like negotiating, it makes me look cheap” – that’s nonsense . If you want to be financially independent, you must understand that negotiation is one of the most crucial aspects of a business. It allows you to get what you want at a rate that works for you, as opposed to its original price. By negotiating, you could save thousands of dollars each year. Imagine if you always had to pay the correct amount for all the purchases you made? That’s a lot of money you could have saved for investing.
8. Always make a budget and stick to it: It is not enough to have a budget, it is just as important to follow it. This allows you to record your planned spending, and it gives you a certain balance and discipline when spending, because you would be aware that a certain amount is meant to be spent on something important, that you have planned. Having a monthly budget that you can commit to is a great way to prepare for financial freedom, one that we highly recommend.
Your 20 years will not be here for long. It’s a time when you can make key decisions with minimal consequences and still have time to recover. However, we urge you to learn from these eight tips, and with hard work and persistence, you can be sure to gain financial freedom in your 20s.