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Personal Finance

8 Ways to set yourself up for financial freedom in your 20s

These simple tips might just be what you need to set yourself up for financial freedom.

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Your 20s is one of the most important stages of your life, especially in determining your financial trajectory. One certain thing about financial freedom is that no one ever stumbles on it, you have to plan, and be intentional about it.

Mismanaging your 20s could see you spiral into a rat race that you may never recover from, especially after setting up a family.

Although it might be very difficult to become financially free in your 20s, it is your responsibility to ensure that you are on the right track. How do you do that? Simply go through our list of 8 ways to set yourself up for financial freedom in your 20s, below.

READ: 7 Reasons You Need to Start Getting Thrifty

Also, remember that it is a process. Unless you hit a jackpot and invent a product that goes viral worldwide in your 20s, you have to follow the process. And even if you hit a jackpot, financial prudence is still necessary for growth and sustenance. Look around you, numerous examples of individuals exist, who were once millionaires or billionaires, but now declared bankrupt. This should tell you something.

8 Ways to Set Yourself Up for Financial Freedom in your 20s

1. Draw a blueprint for the future: Financial freedom is a goal. Just like other achievements that you planned to accomplish at a set time, you have to perceive it as something that you need to attain. The first step to drawing a blueprint is having an idea of what it would look like. Likewise, the same concept applies here; set your mind to your plan, and draw it out. Set milestones that you plan to hit, and set dates when you plan to achieve them. The path to financial freedom entails these key factors; identify them, and you’re well on your way to becoming a financially independent 20-year-old. Remember, nothing perfect was created without an initial plan in place. Faraday didn’t just wake up one morning and create electricity with a snap of his finger, it took countless hours of planning to invent the greatest element used by man.

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2. Understand investment and leverage your knowledge of it: Sure, this could have simply said; “Invest more often” or “Start investing” but people tend to read these articles and act based on the words of the article solely, rather than what the words also imply. Investment is good, and even better, do it more often but it is important to note that it is not something to jump into out of the blue. It takes reading and studying to understand how to play your cards right when investing.

After studying the art of investing, then you can proceed to the next phase; leveraging your newly gained knowledge. Invest wisely in places where you are sure to get a high return. Do these in different places, and in a matter of time you can puff your chest and do “yanga” to those friends that said; “You’re young, spend your money and chop life”. We’ve all had those kinds of friends. Be wise, make smart investments, and work your way to gaining financial freedom in your twenties.

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3. Find a financial planner: The importance of this step cannot be undermined. While some try to gain financial freedom on their own, many get financial planners to help them attain this feat. A financial planner would help you create detailed and useful financial forecasts that will let you know what you have done financially, and how it affects your financial forecast. In some cases, they could also advise you on the best financial oriented actions to take to get the best results in your financial forecast. Your goal is to be financially independent in your twenties, great! Set a forecast that dates to your set time, and you can have a rough idea on what your financial status would look like in that year.

If you’re curious to know what the heavily reiterated “Financial forecast” would address, they portray, financial risk management, investment planning, cash flow management, insurance planning, tax planning, business succession planning and more.

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4. Filter needs from wants: If you’re planning to gain financial freedom in your twenties, you need to learn how to identify what you “need” and what you “want” out of mere interest. This is not only a key step towards financial freedom but also to adulthood. Needs in this context, don’t necessarily mean the “essential human needs” like food or shelter. A need is what is exclusively crucial to you at the moment, which is worth spending money on. From that definition, you can most likely conclude on what “wants” would be. When trying to make a purchase, always ask yourself if you are in dire need of it or consider the benefits of getting it; do they outweigh the cons of not having it?

No matter how convincing that salesman is, don’t let him talk you into buying what you do not need. Spending on the necessary things gets you financial freedom, and it’s a long-term ideology in adulthood.

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5. Don’t rush, patience is key: “Click here to earn millions like this sharp guy from Lagos.” or “Invest 20k to get 100k in a week.” Here is a tip; work towards achieving your goal of financial freedom, but know that it will not be easy – nothing worthwhile is easy. Be patient, don’t jump into schemes and scams, thinking they are smart investments. Point number 2: Understand investment, and leverage your knowledge of it. There is no “get rich” quick path or “double your investment in 24 hours”. Most of these schemes bank on paying you with other people’s money, and eventually many lose and only a few benefits. Keep in mind that wealth grows and accumulates over a long period, therefore be patient and disciplined enough to see it through.

6. Don’t secure loans you are not sure to repay: Look to secure loans when it is necessary, and when doing so, ensure that you can pay it back. For example, the debt you acquire to finance a higher education should not exceed your expected income. Do not borrow a sum that you cannot repay, and always consider the interest rate of the debt. The last thing you want to do is be the person who wants to gain financial freedom but has a lot of debts to clear. For you to move forward, you have to be free of debt. Mark Cuban once said; “The best investment is paying off your debt”.

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7. Be a businessman, negotiate: Don’t be the person that always agrees to the price called by the seller, neither should you be the kind of person that says “I don’t like negotiating, it makes me seem cheap” – that’s absurd. If you’re going to be financially independent, you have to 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 is in your favour, as opposed to its initial price. By negotiating, you could save thousands annually. Imagine if you always had to pay the exact amount in all the purchases you have made? That is a lot of money that you could have saved up to invest with.

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 expenses, and it gives you a certain poise and discipline when spending, as you would be conscious of the fact 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 set yourself up for financial freedom, one that we highly recommend.

Your 20s are not going to be around for long. It’s a time where 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 accompanied by hard work and perseverance, you can be sure of gaining financial freedom in your 20s.

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