In your 20s and 30s, you are just starting out. At this phase of life, you are likely to have some debts like car loan, study loans as well as credit card debts or housing loan. Most would not have acquired any significant assets.
Retirement and children’s education are likely far from your mind. You be likely to spend a large amount of time to establish your career.
Your greatest asset at this stage is not money; it’s your time! Your decisions about what you do with your money will have a big impact later on. Why? The magic of compounding interest. Assume that interest rate is at 5%. At 25, if you just save 200 a month, at age 55, you’ll have over 200,000. If you started 5 years later at age 30, you will need to save almost 350 to reach the same amount!
Starting now means being able to afford a much better lifestyle later. As you get older, you have less time to grow your money. It becomes more difficult to meet the demands of raising a family, children’s education, and retirement and having a good lifestyle.
Compounding interest can work for you or against you. One of the first things is to try eliminating credit card debts. With interest rate at 18% per annum calculated monthly, you are the credit cards companies’ cash cow! Treat credit card debts as your enemy number one towards financial freedom.
Have surplus saving should be your target as this is the first step in your wealth creation strategy. Put some funds in an emergency fund to take care of unexpected expenses, besides having health and disability insurance.
Enlist a good financial planner to help you. Remember, it is never too young to start. The earlier you start, the better you will be.
Related Articles:
