Saving for retirement, becoming wholly financially independent or reaching debt freedom might seem intimidating or even out of reach at a young age. But it’s important for young individuals to start making good money decisions if they want to have financial success later in life.
Here are some of the most important lessons to learn about money before you turn 30, according to financial experts:
1. Find joy outside of spending.
2. Avoid consumer debt.
3. Build an emergency fund.
4. Start investing early.
5. Don’t forget to prioritize retirement.
6. The sooner you start making good financial decisions, the sooner you reap benefits.
Find Joy Outside of Spending
When you’re young, you’re building your values and financial habits. That’s why it’s a good idea to set yourself up for a fulfilling life regardless of how much you earn.
“Learn to find joy without spending money,” says Gary Grewal, certified financial planner and author of “Financial Fives.”
“You can reach financial independence much faster if you can live happily on $3,000 per month versus $8,000 per month,” he adds.
Grewal advises spending your 20s doing things like volunteering, enjoying outdoor experiences and other activities that bring you joy without straining your wallet.
“You’d be surprised at how much more you value your time versus working to pay for material goods,” he says.
[READ: 15 Steps to Achieve Financial Freedom.]
Avoid Consumer Debt
Credit card debt is easy to get into and hard to get out of. Sky-high interest rates mean you can get stuck paying bills for a long time — and if you can’t pay them back, the effect on your credit score can haunt you for years.
“When you’re establishing a credit score, consumer debt can hamper your ability to get a mortgage or car loan, at least under favorable terms. Having a spotless credit report and excellent credit score can save you tens of thousands in interest charges over the years,” Grewal says.
Ideally, you’ll avoid taking on consumer debt in the first place but if you are in a situation where you already have credit card or other high interest rate debt, make it a priority to pay down those balances.
“By paying down high interest rate debt, you will free up your monthly cash flow so you can start to save for your goals,” Kerry Keihn, partner and financial advisor at Earth Equity Advisors, says.
Build an Emergency Fund
An emergency fund is a critical tool to maintaining financial independence if the unexpected arises, Keihn says. It’s best to start saving — ideally shooting for three to six months’ worth of expenses — as soon as you can.
The sooner you get started, the more you can make your fund work for you with a high-interest rate account.
“Make sure your emergency fund is working for you by taking advantage of higher savings rates. Although many banks and credit unions have increased their interest rates significantly, some are still paying very low rates and you could be missing out on earning cash each month just based on the bank you use,” Keihn says.
[READ: How Much Should You Save In an Emergency Fund?]
Start Investing Early
The earlier you start your investment portfolio, the more time you have to see returns. Even if you can invest only a small amount when you’re young it’ll still put you ahead of the game.
“By investing a few hundred per month in your 20s, you will almost certainly be a millionaire by your 60s by investing in index funds. Someone starting in their 30s must invest hundreds more per month for the same result,” Grewal says.
Don’t Forget to Prioritize Retirement
When you’re young and starting your career, retirement might seem like a far-off goal. Still, saving from a young age is crucial to a successful retirement.
“The biggest step you can take toward future financial independence is saving for retirement. If you have the option to contribute to a workplace retirement plan, make sure you’re taking advantage of any matching contributions your company offers,” says Keihn.
[Read: How to Maximize Your 401(k) Match.]
“If you don’t have access to a workplace retirement plan, don’t worry. You can still save for retirement by opening a personal investment account,” she adds.
Prioritizing your retirement not only means you won’t have to play catch-up later in life, it might actually help you retire earlier.
“The No. 1 lesson I wish I understood before turning 30 is that retirement is not an age. It’s a dollar amount. Based on the 4% rule, when someone accumulates investments worth 25 times the amount they need yearly in retirement, they can stop working,” Yanely Espinal, director of educational outreach for Next Gen Personal Finance, says.
The Sooner You Start, the Sooner You’ll Reap Benefits
The common thread between these tips is to just get started. Don’t put off your financial goals, whether that’s building an emergency fund or retiring early.
“Time is your greatest asset, especially before age 30,” Grewal says.
Even if your retirement is decades away or you don’t plan on buying a home until your 30s or later, establishing good financial habits when you are young will set you up for future success.
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6 Things Everyone Should Know About Money Before 30 originally appeared on usnews.com
Update 04/28/23: This story was published at an earlier date and has been updated with new information
