Money is a strange thing – people say it doesn’t buy happiness, but your experience is that it buys the things that make one happy. You need it to be secure, to buy a house, to pay for children’s education, to get expensive treatment, and so on. As a 20-something with a job, your money behaviour today dictates whether your big dreams for the future come true. Handling personal finances responsibly now will make it easier to do so when there are more demands on your income in the next decade.
Here are our 4 tips for handling money in your 20s:
#1 Get a credit card instead of spending cash.
Spending cash from your wallet is so easy – but it leaves no trail and you cannot remember where all your money went. Switch from paying cash to using a credit card, and you will soon see what a difference it makes to your personal finances. Every swipe of the credit card is recorded, so you have a trail of your expenses to check later. Besides, the best ones have excellent credit cards offers in Dubai’s retail outlets, as well as experiences to savour (based on the card). You can use these credit card offers to save money, redeem points to buy what you like, and even book holidays easily and make more reward points in the process.
#2 Make a budget and stick to it.
There are several areas of expenditure for all of us, whether you are a 20-something living alone in Dubai or a family of five. But the money habits you set for yourself in your 20s set the tone for what follows in the later years: if you are responsible with savings, spending and investments now, the same will come easily when you have a family and many financial goals. Set a monthly spending budget for yourself – this includes eating out, paying bills, repaying debt, incidental travel – and save the rest. Never exceed the budget; in fact, try to be well within it to add to your savings fund.
#3 Insure yourself.
Your income supports your lifestyle, but it might also help any dependents. These include aged parents, younger siblings, and even spouse and children if you are married. All these dependents will be in the lurch if you are absent in the future. You can protect their future by taking out life and health insurance policies for yourself. At your age, you should invest in an affordable term plan and a family health plan that covers yourself and all dependents. Insurance can protect your income and also the dreams of your family.
#4 Build your credit history.
You might not have thought of investing in a house or buying a new car right away – but you soon will. And when that day comes, you will need to borrow institutional funding to realise your dreams. But before you apply for a house or vehicle loan, you must have a credit history that the lender can check. If you have never borrowed a loan before, your credit history will only include bill repayment behaviour and card expenditure, which are not enough for a high credit score. Borrow a short term personal loan to buy something expensive, like a holiday, and repay it before tenure. This builds credit and shows responsible repayment. Meanwhile, pay all your bills on time.
The 20s are the best decade of every person’s life – but it sets the foundation for future wealth. Invest in your future by creating responsible, realistic financial behaviours that will help you amass money and realise all your dreams.