When we reached our ’20s, that was the prime time to build a proper foundation for our financial future. Every choice we make can affect our future financial lives. So, naturally, you should manage money matters with enough caution.
So, for your help, I am sharing 7 best money moves for 2020, basically for the generation Z (born between 1995 and 2015). By following these you may successfully manage money matters in the coming years.
7 Best money moves for generation Z in 2020
Here are the 7 money moves to follow:
- 1. Avoid credit card usage
- 2. Pay off high-interest debt
- 3. Start saving for retirement
- 4. Save for buying a house
- 5. Establish an Emergency Fund
- 6. Prepare budget and track each spending
- 7. Buy life insurance
One of the best money moves for generation Z is to stop using credit cards. It is too easy to use credit cards for different purposes. But, credit card debt can’t be removed easily.
Using credit cards responsibly will help you to build credit. But if you use it irresponsibly and incur debts, it might hamper your score. Break your habit of using a credit card right now. You may avoid using your cards and use cash instead, even for emergencies. You need to carry cash as per your shopping plan. This will stop you from having to pay off high-interest debts and control your credit utilization.
You’ll notice that most of the collateral loan interests are quite affordable. It may include interest on home loans, most student loans, and even car loans. But few unsecured debts like credit cards, payday loans, and personal loans may have the highest interest rates in the market. So, carrying unsecured high-interest debts is just wasting your money. You’ll have no tax benefits in unsecured debts where many secured loans can give you tax deductions.
So, paying off high-interest debts is one of the wisest money moves for generation Z.
Start saving for your retirement even if you have just started your employment career. It is better to start early so that you can save enough to make your nest egg bigger, until you retire. It is advised to open a 401(k) or IRA now.
If you start contributing to your 401(k) from now, your money will have enough time to get bigger. This means you can start with contributing a smaller amount per month, but still, in the end, you’ll get as much money as any other person who started contributing late.
Financial advisor Jude Wilson suggests – “For most people, making contributions to a Roth IRA just makes a ton of sense. It’s the gift that keeps on giving since contributing to a Roth today will help you build tax-free income in retirement.”
As soon as you manage your unsecured debts like credit card debt or payday loans, you should start saving in a different account for using as a down payment on a house. It might be a small home but it will be your dream home. So, do not compromise this life goal for any other relatively unimportant reasons like traveling, dining, or shopping…whatever it is.
Save as much as possible for a down payment. The more you save, the more equity you will get initially. If you have a student loan to pay off. You can buy a home and pay your student loans at the same time. But you need to maintain a solid budgeting strategy for managing such money matters.
An emergency fund is like insurance coverage for any sudden financial crisis. Once you build it, it can provide you with stability and the force to make strong, riskful financial moves to earn more.
Paying off debt can’t go parallel with an emergency fund. You must give priority to pay off your high-interest debts. Once it is done, you may start your emergency savings with full force.
Financial advisor, Joe Carbone of Focus Planning Group , has suggested his clients to save at least six months of expenses as emergency fund. He added – “This way if an unexpected expense comes up, you can use your own money – not a credit card with the potential to pay high-interest rates.”
In your twenties, it is the most important money move that you should make without any hesitation. Whatever your financial status is, it’s always wise to prepare a solid budget. But in your 20s, you must start budgeting as early as possible.
Budgeting enables a person to analyze the monthly income, track monthly spending, and categorize funds accordingly. You may prevent overspending on wasteful items through proper budgeting strategy. With time and hard work, you may create a workable budget so that you may manage money matters skillfully.
Buying life insurance is one of the best money moves for generation Z. You’ll require a good life coverage to support your parents and spouse financially, if anything happens to you. Your family will be secured with a good amount of money to meet their future needs.
If you’re unsure of how much life insurance you need, industry professionals would suggest you start with 10 times of your annual income as term life insurance coverage. You also have the option to get a whole life insurance policy.
These are the 7 useful money moves that you can make to become financially free. Managing money is easy if you have determination and hard work, combined with patience.