How to Begin Investing in Your 20s
Your twenties is a crucial decade for your finances. This is the time when you transition to adulthood and get your first job, and the first paycheck. While it feels great to spend on the things you want, it is also important to invest a portion of your income for your future needs.
If you’re thinking you have other responsibilities even to bother investing now, think again! If it’s hard, remember that now is always the hardest time to invest. To help you get started, here’s how a smart 20-something, like you, should begin investing:
A survey by Manulife Investor Sentiment Index (MISI) found out that most Filipinos are good savers. However, it also discovered that Filipinos remain largely reliant on debt to get by daily and most aren’t well-versed in investing their money efficiently. In fact, 4 out of 10 (41%) of Filipino investors carry debt making the country the second highest in Asia after Malaysia.
Debts keep you from investing. Instead of focusing how to grow your money, debts are there to distract you. To avoid debts as much as possible, avoid lifestyle inflation, find ways to make extra money, and start managing your finances responsibly and effectively.
Track your cash flow
One of the most important things to be aware of, especially in your 20s, is to monitor the cash flow. Creating a budget is not a hard task as long as you have the right attitude and the proper resources to start.
If you don’t have a budget guideline, here are two suggestions that really worked:
The 50-20-30 rule
Fifty-percent of your total income is apportioned to fixed or essential expenses. Twenty-percent of your total income is put toward your financial goals such as savings. The final 30% of your income is used for flexible spending or variable expenses.
The 52-week challenge
Here are the following weekly increments and the total amount of your savings after 52 weeks to help you get started.
Weekly Increment: One Peso
What you save after 52 weeks: Php1378
What you save after 52 weeks: Php6890
What you save after 52 weeks: Php13,780
What you save after 52 weeks: Php27,560
Weekly Increment: 50 Pesos
What you save after 52 weeks: Php68,900
What you save after 52 weeks: Php137,800
Learning continues even right after college. If you are a fresh graduate in your twenties, then don’t stop. You only live once so polish your skills. You can enroll yourself in a short course online or join a seminar or workshop. You can spend your weekends attaining a master’s degree or other short course classes. You can also read fun financial blogs, or you can buy financially related books as well.
Don’t you know that you can begin investing in the stock market as early as now? In fact, the Philippine Stock Exchange Academy allows a minimum of P5,000 to begin investing. But keep in mind that investing in the stock market should not be done with a hasty decision, you have to give yourself enough time to determine your financial goals and to understand the stock trading market.
Insurance is there to give financial security, especially to your beneficiaries. Most twenty-somethings will feel that getting insurance is the least of their concern. But it is better to get one know earlier than later.
There are different types of insurance that cater to different needs. But for starters, you can avail a simple life insurance that gives you an endowment every three or five years
Create an emergency fund.
An emergency cash is an important investment. This is needed to prepare for unexpected expenses. Financial experts recommend that your emergency fund should be six times your gross monthly income. Of course, you may need more or less depending on your situation.
Invest in quality purchases.
Invest in things that have value, especially the ones that do not depreciate fast. These investments include gold and jewelry, luxury watches, designer bags and whatnot. You may also use these items as collateral in case you need extra cash. Some pawnshop accepts a wide variety of items to give quick and easy cash loans.
The Bottom Line
Time is your biggest friend and rival. For a twentysomething, overlooking time is a major issue. Although this could be understandable as retirement is still decades away, this mindset can also be a detractor.
If the lack of funds is keeping you from investing, know that every little step counts. Remember, start being financially responsible now and your future self will thank you.