5 Financial Lessons to Learn Before You're 30
Like building a good credit rating and getting inexplicable joy from cleaning your home, making smart financial decisions is a big sign that you're growing up. Learning to take control of your finances is a process that takes time and diligence. If you're in your 20s or nearing the big 3-0, take note: The team at Money has rounded up the top things everyone should know about their finances by 30. Read on for our edit of the top five financial lessons everyone should master.
Lesson 1: Everyone needs a backup fund.
Establishing a rainy day savings account is tough when you're young. According to Money, only one in three millennials has enough money saved for a single emergency room visit or car repair. Yahoo finance expert Mandi Woodruff tells MyDomaine that a backup fund should contain three to six months' worth of expenses to be safe.
Lesson 2: Tackle debt first.
If you've accumulated debt in your 20s, you're not alone. Two in five millennials have credit card debt—and that doesn't include student loans. Financially savvy people know that debt is surmountable if tackled head-on. Start by organizing your debt by interest rate or size, always pay more than the minimum, and automate your payments.
Lesson 3: You're never too young to plan your taxes.
Taxes might not sound like an exciting topic, but developing your own tax strategy in your 20s is key to building wealth. Money suggests this handy offset tip: You can deduct up to $2500 in student loan interest to reduce your taxable income.
Lesson 4: Financial freedom is liberating.
Taking control of your financial future is liberating. It opens up endless possibilities and gives you a chance to map your goals and plans. While it's easy to compare our spending habits to other (thanks, Instagram), a big part of maturing is realising that only you can take control of your finances.
Lesson 5: Managing Your 401(k) is vital.
More than half of Americans are unsure about how to manage a 401(k), but learning to take advantage of retirement benefits is a big sign of financial maturity. If you're lucky to work for a company that offers retirement benefits, Money recommends contributing over 10% of your annual income to your 401(k) and never treat it as a backup fund—you'll be hit with taxes and a hefty fee for making a withdrawal.
Keen to take control of your finances? Shop the book below for sound advice, then visit Money to read more.
What is the biggest financial lesson you mastered in your 20s? Tell us in the comments below.