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5 Money Habits to Develop Before 30

The best time to invest is when you’re young. Small investments now can grow to be very large and lucrative. If you ask any older adult about investing, they’ll tell you to start as soon as possible because they know what can happen over time. Here are five smart investments that every young adult should be making.

Emergency Fund

Bankrate recommends that 20-somethings “Begin with a goal to save $25 per month to build up $1,000 of emergency savings in case you break your arm, your vehicle needs repairs, you lose your job or some other unavoidable expense comes up.” They recommend using some sort of automatic withdrawal system so you are not tempted to spend it on something less critical but seemingly a good idea at the moment. You need to start small with an achievable goal. Once you reach that you can move the goalposts to your next challenge. For money that you definitely won’t need for a longer period whether it be 3 months, 6 months, 1,2,3 or 5 years you should consider a certificate of deposits. Otherwise known as a CD, they allow you to gain interest on money that’s just sitting in the bank. All you have to do is avoid touching it until the agreed upon date in order to avoid the penalty, and you’ll automatically increase your money. The more money you put into a CD, the more money you’ll earn.

Retirement Savings

This is usually the last thing on young people’s minds when there are tons of seemingly more important things to think about. Making those preparations and sacrifices now can lead to a comfortable life later. Consider a Roth IRA so that you can take advantage of the tax-free growth and withdrawals. Another good way to save is to set aside a portion of every raise you get. There are many examples of people who set aside half of every raise and retired in their 50’s as multi-millionaires. This is the magic of compounding.

 

Buying a Home

When you rent a home or apartment, you’re basically paying the owners way more money every single month just so you don’t feel tied down. If you own your own home, mortgage payments are usually significantly lower than rent would be. You could even rent your home out when you feel like moving to a different location, allowing you to earn passive income. If you are wondering about how they compare try this Rent vs Own calculator and see where you break even. You simply enter the purchase price and how much rent you would be paying and few other things and boom you find out how many years it takes you to break even and from then on you are making money owning your home. And once you get the mortgage paid off, you can live rent free which will NEVER happen if you continue to rent.

The Stock Market

If you’re aware of what’s trending in society, you should consider purchasing stocks in that industry. You’ll basically own a share of the company, so if they do well, your stocks will do well. It can be risky but the rule of thumb is to buy low and sell high to gain profit. Unfortunately, emotion is not on your side. Unlike going to the grocery store where it is easy to buy when things are on sale, it’s hard to buy stocks when the price is down because everyone is saying that it is a bad investment. It’s much easier to buy when prices are going up and everyone thinks they will be millionaires before they are 30.  If in doubt, you can seek out professional financial advisors who aren’t working on a commission so they will have your best interests at heart.  UBS – The Burish Group says “Growth options are everywhere. But it takes a plan and a strategy to know which are right for you—and when to make your move.”

Your Education

Yes, an education can be very expensive, but if you choose the right career path and make good choices, it can be the best investment you’ve ever made. Your education can’t be taken away once you’ve earned it. An investment in your education is an investment in yourself. But be sure to look for ways to get the best education for the least cost whether it be through online learning, scholarships, grants, etc.

Always seek advice before making an investment because there’s always someone that has gone through what you’re going through now. It won’t always be easy but it’ll definitely be worth it in the end. If you start making these investments now, you’ll set yourself up for a prosperous life.

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