There is no doubt that pretty much daily, you are making financial decisions that can impact your life. Of course, many of these choices could be very minor, while others are major decisions that may take some time to reach a conclusion.
However, financial decision making is something you will learn to master as you become more financially savvy. And many early choices you make are not always easy to tell what impact they may have on your future. Here is a list of the best decisions when it comes to your money and the positive influence it can have on your financial health in the future.
1. Building an Emergency Fund
If you have read any piece of personal finance content, then it’s been hammered home the importance of building an emergency fund. The sooner you have one ready, the more you can focus your income on other wealth building investments.
Ideally, an emergency fund is to cover unexpected expenses or repairs. I also like to look at a lifeguard if something were to happen to your main source of income, like getting laid off. Then you know you can cover your monthly expenses for the time-being.
2. Investing for Retirement
The sooner you start investing for retirement, the better your golden years will be. While you cannot predict how long you will live, you need to start financially preparing yourself.
Many people figure they can worry about retirement saving for later. But the reality is, later sneaks up fast and it is much harder to make up the time missed on compound interest.
3. Create A Debt Payoff Strategy
If you have high interest credit card debt or student loan debt, you want to immediately start figuring a payoff strategy. The last thing you want to do is be stuck in a vicious cycle of debt because of interest rates, plus you just are throwing more money away.
For your debt, you can look at the debt snowball or debt avalanche methods. Both strategies have advantages and disadvantages, but can help you tackle your debt much faster.
4. Improving Your Credit History
Your credit score and history follow you throughout your life. Whether you like that or not, it’s an inevitable part of our lives. And one of the best financial decisions you can make is actively monitoring it and improving your score if it is low.
Your credit score affects if you’ll be approved for loans, the kind of rates you get, if you’ll be approved for credit cards, and more. And lower scores can cost you thousands in extra interest!
5. Track Spending and Net Worth
The sooner you know your expenses and income, the better your financial decisions will be. When you actually see what’s left over or how much items are costing, you become a bit more conscious of how you prioritize your money. Least, it should make you more aware.
6. Continuing Your Financial Literacy
The more you learn about your finances earlier on, the better you’ll most likely be with your money. But as you get older and priorities shift, you should be continuing to improve your financial literacy. Whether that’s knowledge about retirement, building wealth further, investing, or general money management. The easiest ways to do that is read these personal finance books and others, listen to podcasts, and consult with a financial planner or advisor if you need further help.
7. What Further Education Will You Pursue
People with more education tend to earn more money and increase their wealth. That doesn’t always hold true, but it’s something to consider when planning your future finances. But you have other options besides that like trade schools, online courses, and speciality degrees (think coding, marketing, data science).
These financial decisions are important because it impacts the career path you may be choosing and your future income. You can always pivot and switch careers, but it can be more challenging as you get older.
8. Will You Own A Home
One of the largest financial decisions you’ll have to make is whether you plan on owning a home. Not everyone will be interested in owning one, many will rent and that is a perfectly fine choice. Everything from the down payment, to getting a mortgage, property taxes, and to maintenance of the home. Plus, where and how long will you live there are factors to think about too.
9. Going to Marry or Not
While you don’t want to just look at marriage as a financial asset, it can help you and your partner financially as well as build more wealth. You are combining assets and incomes (generally), which can put you and your spouse in great financial health. Again, money and wealth should not be your main drivers for getting married. But, it is still something you need to consider to prepare and have a plan.
10. Having A Child (Or Multiple Children)
Whether you want to have a child or children can be a complicated answer. And it’s a decision that can change over time as well. But as you reach further into adulthood, it is certainly something you want to ponder. And if you are married or have a significant other, it’s something you want to talk about so you are both on the same page.
11. What Your Retirement Plans May Be
Even if you are in your twenties, you still want to be thinking about potential retirement plans. Certainly these could alter if getting married and start a family, as priorities will shift. But the early you are thinking about retirement, the better prepared you will be. The best thing you have on your side at that age is time.
This allows your money to compound further and gives space to make mistakes, but still have time to recover. And even if you’re not in your 20s anymore (ahem, me!), you should think about your goals when you reach retirement age.