Major MONEY Milestones To Accomplish in Your 20s! #Finance

hey guys in this CashNews.co we’ll be covering what major money milestones you should aim to accomplish in your 20s the idea for this CashNews.co came after a friend of mine kayla who is 25 years old wanted to know what else she needed to get done in her 20s to achieve financial

freedom so i am 34 right now and i learned a great deal about personal Finance Budgeting and investing in my 20s in fact i was even a financial advisor for

bank of america merrill lynch when i was 25 and i attribute a lot of my investment knowledge to that experience now when you’re starting off at the age of 20 i feel like the college and education system here just don’t really teach you that much when it comes to managing the adult world

of Finance so this CashNews.co is meant to be a one-stop shop for all of your financial needs to get a solid financial foundation going i hope that you share this CashNews.co

with a friend who might need it and then it becomes a resource for you in the future that you can reference at any point in time so with that being said make sure to hit the like button on this CashNews.co and let’s get started this CashNews.co first covers what it takes to build a financial

foundation in chronological order and that means we need to start with the first financial milestone which is to pay off Debt or stay out of student Debt so chances are if you graduate college you’re likely going to have some student Loans

and you might even have some Credit card Debt the average student Loan Debt in america is 39 000 and oftentimes if you’re going to a four-year institution or even a two-year institution after transferring from community

college you’ll likely take on some student Loan Debt one of your first major milestones in your 20s is to figure out a plan to pay off this Debt usually federal student Loan Interest Rates are between four

and six percent and you’re gonna have many of your friends probably tell you that you can get an average of eight percent on your money by being invested in the market so they’re going to say things like why are you paying off your Debt when you can just invest it and

get a higher return while you can earn a percent in the market many people often forget that you can also lose that money as well if the market doesn’t do as hot when it comes to paying off student Loan Debt try to prioritize it over investing because at

least you know it’s going to give you a guaranteed 46 return on your money and the sooner you get rid of student Loan Debt the quicker that weight is going to be lifted off of your shoulders and you can afford to take on more risk in life the point of paying

off Debt is more so that you can afford to take these risks in your 20s uninhibited when you’re Debt-free you might take a chance on a start-up or a risky business venture that could net you maybe a 50x return in the future but when you’re burdened with

Debt you’re basically a slave to that Debt and you have to continually service it which means that you might have to compromise your best learning years by being forced to take a job you might not enjoy if you’re at the point in your life where you

still haven’t entered college yet you may want to reconsider if a four-year institution is actually worth it for you because taking on massive student Debt in the long run is going to be hard also you can just go to a community college for two years and then transfer into

that same four-year institution in your junior year by the time you graduate it’s all the same anyway no one really care that you went to a community college your first two years they’re just gonna see where your diploma came from and if it’s the same as all your peers then there

you go alright the next milestone you should be hitting which should help with the first milestone of paying off Debt is to get a job where you can earn Income and get experience in your 20s you want to try out as many jobs as possible and earn

Income at the same time one of the things that you should strive for before the age of 30 is that you’ve hopefully found a career that you love and that you can work in for a while because the highest earning potential usually comes from being in the same industry for a long

time think of it this way would you rather hire a plumber that has one day of job experience or someone who’s seen 000 clogged toilets in their life over the span of 30 years you’ll probably want that second plumber because he knows exactly how to fix your pipes in a fraction of the

time the people that can demand the most amount of money in the market typically have been in their jobs for a long time so in our 20s we want to figure out what that is or at least hone in on exactly what that’s going to be now if you don’t find your job for life in your 20s

that’s no sweat either this milestone is more about getting experience working having experience is one of the most valuable things you can learn because it’ll also teach you of how important it is and how hard it is to make money so i used to think in high school that a hundred

thousand dollars a year was gonna be so easy to make until i actually started in the workforce and realized like man this job is gonna take me at least five years of working really hard right now i’m being paid 40k and it’ll be a long time before i hit a hundred thousand dollars a year

that was really eye-opening for me and it really taught me the value of money and how hard it was to make assuming you get a job the next major milestone in your 20s to hit is a triple threat and they all go together so i’m basically gonna call this milestone the trifecta milestone and it

consists of the following number one delayed gratification number two staying out of Credit card Debt and number three building your Credit wisely so let’s break this down typically in your 20s is when you’ll get your first

Credit card now Credit cards are not evil per se but they can really help you build your wealth in the 20s especially if you use them correctly that means you want to pay off your Credit card in full so that you don’t fall into the recurring

cycle of owing money on your Credit card Credit card Interest Rates are on average around 18 so these can really kill your financial foundations if you aren’t responsible with your spending with Credit cards if you are able

to stay responsible with your card you’re gonna be able to build some solid Credit the biggest benefit of having a great Credit score is getting a lower interest rate on Loans and financing for homes and cars having a good

Credit score can also help you get approved for rentals faster now a lower interest rate i know it sounds like a boring benefit but on a mortgage for example the difference in just a point five percent interest rate is absolutely crazy on a Loan amount of four

hundred thousand dollars with a good Credit rating you might qualify for a Loan rate of five percent which amounts to three hundred and seventy three thousand 000 and change in interest over 30 years now pretend you have a slightly worse Credit

score and that means you qualify for a five and a half percent interest rate over the course of 30 years that same Loan is going to cost you about 417 000 in interest that actually amounts to a difference of 44 000 over the course of the Loan that’s crazy

because getting a good Credit score is not that hard as long as you pay off your bill on time and you stay out of too much Debt now here’s the thing though about that you can never miss a payment so to illustrate how important this is if you make 99 of your

payments on time you basically get a b so literally with a Credit score you cannot afford to miss any payments at all and that’s why you should always have on autopay when you can and the last part of this trifecta milestone is simply delayed gratification if you can delay

your impulse purchases in your 20s you’re gonna have an easier time compounding your wealth for the future and that’s simply due to the fact that one dollar today is going to be worth more than one dollar in the future the more Capital that you can accumulate when

you’re young that means the bigger the base is going to be that you’re going to have when it comes to investing and compounding your wealth so let’s pretend we have a person a and b they both don’t invest from the ages of 20 to 30 but at least they save money person a saves

up 500 a month so by the time that they’re 30 they have 60 thousand dollars ready to invest person b on the other hand they save up 750 a month so they have 90 000 by the time that they’re 30 ready to invest now pretend at the age of 30 they both start to invest in the market and they

get eight percent until they retire and they both do the same thing by the time they’re 65 person a is going to have an 887 000 ending balance while person b is going to have over 1.33 million that’s a difference of 443 000 just because person b was able to save a couple hundred dollars

more per month than person a from the ages of 20 to 30. so the next time you’re looking at buying those gucci slides think twice because by delaying that purchase you might be able to afford something way nicer later on in life like a pair of crocs that was a joke hopefully you got it the

next big milestone in your 20s you should accomplish is having a Savings goal either for a house a wedding a dream vacation or taking a risk like starting a new business having a Savings goal i think forces you to create a budget and that way you can work backwards

from the goal itself a big part of your 20s is navigating the fact that you’ll be making an Income and your goal is to not spend all of it in fact if you can live below your means it’s almost always a good idea because it kind of goes back to this idea of delayed

gratification by living below your means and as you start to earn more Income you’re going to be able to save for big goals like that down payment on a home a wedding that you’ve always wanted or an engagement ring i know for me personally i’ve been spending

roughly the same amount of money every single month since the year 2014 because i track it in my expense tracker app starting out i was spending about 1500 a month on all my discretionary expenses and i wasn’t really making that much money at the time about 45 to 50 000 a year so basically my

Income relative to my expenses was not that great in fact i was barely saving any money after Taxes but as my Income personally grew my expenses have always stayed roughly the same and i’ve been living like i make 50 000 a year this entire

time now as a result of that i now have a lot of money saved up and i’m thinking about either putting a down payment on a house or a rental property in the bay area which let me tell you guys is not cheap heck i can even afford a lovely engagement ring without even having to worry about it

damaging my Finances so if you happen to be taylor swift watching this CashNews.co oh hey or maybe another single lady make sure you dm me all jokes aside i was able to

achieve this because i just really haven’t changed my lifestyle that much the thing with increasing your lifestyle and buying new clothes or new shoes is that they’ll make you happy for like a temporary amount of time but after that initial honeymoon period ends your happiness level is

right back where it started so in your 20s you really want to focus on the things that make you happy that aren’t tied to spending more money and that’s going to go a long way in your life okay but now you’re probably wondering what’s the right amount to save the next major

milestone you should hit is building a budget now many financial experts recommend the 50 30 20 rule which helps you distribute your Income we’ll get right into that but first i want you guys to do the following and it’s going to take you about an hour or two but

it’s going to be well worth it basically you’re going to go into your bank statements and your Credit card statements and just comb through them categorize each expense into a need versus a want if it’s an expense like rent utilities car Insurance

health Insurance that would be a need if you have discretionary spending like jamba juice waffle house or netflix that would go into the want category the 50 30 20 rule states that your Income should be divided fifty percent into needs thirty percent into once and

twenty percent into Savings so that means if you’re making about five thousand dollars a month twenty five hundred would go towards your needs like rent and utilities 1500 would go into discretionary and a thousand should go towards saving for future

Investments and speaking of Investments this next part of the CashNews.co is the fun part assuming that most of you guys have most of your Debt out of the way a working budget an Income and at least an emergency fund this is where

you want to start investing for the future and you can do so starting in retirement accounts in america there are two types of retirement accounts that most people will want to open the first is the roth ira which is an individual retirement account and the second is a 401k which is an

employer-sponsored account now both of these accounts have a roth and a traditional version the main advantage of having a roth ira is that your earnings and Profits are growing tax-free that means when you retire and you withdraw all the earnings on this account you won’t

pay any Taxes on it at all that’s what the roth portion of the ira denotes it’s tax-free when you retire but when you put in money it’s actually taxed now this benefit is so good that the government limits how much you can contribute to it if you’re under

the age of 50 you can only contribute 6 000 a year into a roth ira and if you’re over the age of 50 you can contribute 7 000 a year an extra thousand as a catch-up mechanism the other notable thing is that you need to contribute to the roth ira like i said with after tax dollars so in a

traditional ira money going in is going to be pre-tax but coming out you will be taxed on it in a roth ira it’s the exact opposite money going in is going to be taxed already so when you withdraw it they’re not taxed at all now in order to contribute to a roth ira you need to have

what’s called earned Income which means that you need to get your Income working for someone else yourself or from a business that you own you can open up a roth ira at any Brokerage like fidelity schwab vanguard wealthfront acorns and all

these Brokerages should make it really easy for you guys to sign up for one once you sign up for one though you want to transfer money from your normal bank account to your roth account and then the final step is to actually purchase some Investments in the account

we’re going to talk about what to invest in shortly but first let me cover the 401k really quickly so the 401k traditional roth is an employer sponsor account that means you can only start it if you work for an employer that offers it as one of their employee benefits now many corporations

will offer this type of retirement account and it’s pretty common across most companies you can contribute a portion of your paycheck into the 401k and this account has a much higher contribution limit of 20 500 per year in the year 2022. anything you contribute to this account in the

traditional 401k is pre-tax dollars which means that you get taxed later on but basically you defer your Taxes to later for many people their Income and therefore their tax rate is going to be lower at retirement so they’re paying a smaller amount of tax on

the money in the future and that’s why they would want to defer their Taxes until later now because this is a retirement account you’re going to be taking penalties for withdrawing any funds from it before the age of 59 and a half now after the age of 59 and a half you

can withdraw penalty free now one of the biggest advantages of the 401k is that if your employer matches the contribution that’s basically like free money so a lot of employers these days offer a 401k match which is a benefit if you work at a company so oftentimes if you contribute five

percent of your paycheck to your 401k companies will match your entire contribution up to a certain amount that means it’s like free money for you and your retirement in the future so if your employer offers this this is an absolute no-brainer you must do it because it is free money again and

it is going towards your future anyway the last thing to note is that yes you can have a 401k and a roth ira at the same time so after you have either one of them or both of them you need to figure out where to invest the money for most people investing in an index fund or etf is all that you need

to do so an index fund is a type of pooled investment that you can buy in your retirement account or Brokerage account now when it comes to index funds an index fund is basically a pooled investment that buys into many different other Investments so for example if

you were to buy an s p 500 index fund by buying that one fund you would own a small percentage of every stock in the s p 500 thus you track the entire index that would automatically provide you with diversification because your investment is now spread across the top 500 companies in the us and by

buying an index fund it’s actually way cheaper than buying into each of these 500 companies individually on their own index funds are usually safer bets in a retirement account because based on the average over the course of the past 80 years index funds have been proven to return about eight

percent a year some years are going to be higher than others but on average you can expect your money to grow and compound over time the index fund i love is ticker simple voo it’s vanguard’s s p 500 etf now while this is not financial advice i personally invest in that one you can

invest in what you like there are a ton of ETFs and index funds out there if voo or your etf is not available in your 401k just look for another type of index fund that invests in a lot of

companies in the united states and you should be at least pretty good for those of you buying index funds you want to make sure that you hold them for the long term if you make huge changes whenever the market fluctuates you might miss out on some gains so bank of america found that since the 1930s

if you sat out the 10 best days per decade your returns would be just 45 versus the alternative 20 000 they also found that the probability of losing money over one day in the Stock Market is a little worse than a coin flip at 46 but the probability of losing money in the market

declines to just six percent if you are invested for at least 10 years another reason why it’s crucial to stay invested is because usually the best days in the market follow the worst days and it’s truly impossible to perfectly time the market that’s why time in the market is much

more important jp morgan found that seven of the best 10 days in the market occurred within two weeks of the worst 10 days of the market for these reasons when the Markets are down just

don’t touch your Investments and especially if they’re in retirement account you can just buy them and basically forget about them chances are in 30 to 40 years the market will be much higher than what it is right now and anything you bought in your 20s will seem like a

great deal then now this CashNews.co was not sponsored in any way but i do have a free newsletter that you guys can check out we publish business news and tech news on wednesdays and sundays and it’s aptly named hump days so make sure you sign up for free right down below with the link in

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