How to plan your finances in your 20s

Published on: April 6th, 2022

There is often a misconception that financial planning is most useful for those nearing retirement or for people who have significant assets, but this couldn’t be further from the truth. In fact, many studies show that those who start planning for their future earlier in life achieve better financial outcomes.

For most of us, our 20s are about experiencing life with an income for the first time, and the benefit of financial planning is that it really is about balancing your current lifestyle and getting yourself in a good position for the future.

At Apt, we call this concept living for today while planning for tomorrow. This is critical in your 20s when typically, you have less debt and financial responsibility, so you can build valuable foundations while enjoying your life too.

Living for today…

Financial goals: Building healthy habits

Your 20s should be about experience and enjoyment, but you can both spend on the things you enjoy today and work out ways to save that don’t have a notable impact on your lifestyle and having fun. This will allow you to enjoy today while making sure you build habits that will put you in good stead to meet your life goals in the future. You can read more tips here.

Values and priorities: Working out what’s important

While your 20s can feel like you are living for the moment, poor financial decisions now may follow you for some time to come. Getting your priorities right doesn’t have to be about sacrificing everything you love, but rather ensuring that your spending aligns with what really matters to you.  Aligning your values and your spending is actually about doing more of what you love, not less.  Getting this alignment right now will help you build healthy spending habits that will put you on the front foot as your financial responsibilities increase.

Investing: Getting started

You might not be ready to invest in property but learning how to invest can be beneficial and help you take control of your finances in the future. You can talk to an adviser about your options, as well as look at small investment platforms that enable you to invest your spare change. You can read more about getting started here.

Philanthropy: Shaping your impact

Many of us want to give back and make the world a better place, but in your 20s you may not have the resources to contribute financially. You may however, have something equally as important – time. You can start shaping your impact through volunteering or even taking part in experience volunteering, where you see the world and make a difference.

Financial goals: Your own personal finance coach

Your personal finance coach is someone who can help you manage your finances to achieve your goals. Many people think financial planning is all about budgeting and going without, but at Apt, we believe your money should enable you to do what you love – whatever that is. Whether you want to fund the trip of a lifetime, an expensive hobby, or save for a rainy day, we are all about making it happen for you.

…Planning for tomorrow

Financial goals: Building financial literacy

Understanding the basics, such as how compounding interest works, is a skill that you can use to your advantage throughout life. The earlier you learn the basics, the more you will benefit. There are many resources you can access to get started, like Apt’s free Market Watch newsletter that keeps you updated on contemporary financial planning topics.

Career: Investing in yourself 

In your 20s, you are more likely to have less financial or life responsibilities than at any other time in your working life, so it’s a great time to invest in your greatest asset – your future earning potential. Working out what you want to do with your career and how you can get there will put you on a path to the ultimate goal – financial freedom.

Insurance: Protecting your income

You’re investing time in building your career (and your future income), so it’s also important to protect it as you never know what is around the corner. Putting the right income protection in place will ensure that you can continue to draw an income and support your lifestyle in the event of injury or illness. Your premium will likely be the lowest it will ever be because you are fit and healthy, so locking in protection now make sense.

Super: Setting yourself up for success

With retirement many decades into the future, you may not be focused on your superannuation in your 20s. However, now is the time to get it set up correctly, making sure you have a single fund and the right growth options, as you have time to withstand any market downturns.

Read Next:  How to plan your finances in your 30s

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.