People in their 20s often dream of becoming financially free before they turn 30. But unfortunately, many people live paycheck to paycheck with no hope of achieving financial freedom anytime soon; since unemployment rates are so high around the world, there are few growth opportunities, and the cost of living is high.
The good news is that it is possible to become financially independent before 30, even though it can be challenging. All you need is the right mindset, self-discipline, and the willingness to invest the time, money, and effort needed to achieve this goal.
Here are some timeless tips to help you achieve financial freedom before you turn 30 if you are in your 20s. But First of all, what does financial freedom? And why is financial freedom so important? Let’s see.
What Is Financial Freedom?
Each of us defines financial freedom differently because we all have different goals in life. Financial freedom means different things to different people, so you must determine what financial freedom means.
So how do you determine when you’ve achieved financial freedom? Most people define financial freedom as having enough savings (at least 25 times what they spend annually), passive income from investments, and living the lifestyle they choose. In other words, you don’t have to worry about where to get cash to pay your bills or to spend on things of your choice.
Financial freedom means no longer living paycheck to paycheck or being in debt. Financial freedom can also be defined as having an emergency fund, not working full-time, having enough money left to save each month, and owning a home instead of renting.
Why Is Financial Freedom Important?
Anyone can achieve financial freedom before turning 30 with the right mindset, discipline, and effort. Unfortunately, many people never achieve this goal during their 20s. Nevertheless, reaching financial freedom when you are still young is important since it offers numerous benefits.
Although many say money can’t buy happiness, becoming financially free can help you live a happier, more comfortable life. It is important to achieve financial freedom to afford the things you want, free up a lot of your time, give you peace of mind, and cope better with unforeseen financial problems.
You can spend the extra time you now have however you like after achieving financial freedom before 30. Rather than worrying about money, you can spend this time with your family, on your hobbies, chasing new goals, making a difference, or doing whatever you wish. As a result, you can focus solely on what you want to do rather than what you have to do just to stay alive. You can take control of your life when you have financial freedom instead of letting money control it.
After knowing the importance of financial freedom, you might wonder what you need to do to achieve it. Keep reading to find out.
How to Achieve Financial Freedom Before 30
Set life goals
Your goals guide your actions and motivation. Hence, setting SMART goals is the first step to achieving financial freedom before 30. Calculate how much money you need in the bank to consider yourself financially free by analyzing your current financial situation, creating your dream life, and determining how much money you need to have in the bank. To stay focused on your goals, you could even create a vision board to visualize the lifestyle you desire in the future.
Break down your big goals into smaller ones if you want to achieve financial freedom before 30. Make a list of all the milestones you want to reach along the way and determine how and when they will be reached.
Celebrate your victory along the way, no matter how big or small your victory may be.
Cut your budget
An essential part of financial security is budgeting. The process involves determining how much money you have coming in (your income) and how much money you have going out (your spending). This information will make it easier to identify areas where you can save money and cut back on spending.
Identify the necessary expenses and those that are not. Once you’ve decided how much you want to save, adjust your budget accordingly, possibly by reducing some categories of spending.
In addition to tracking your spending, some budgeting apps can help you find creative ways to reduce expenses, such as canceling unwanted subscriptions.
When you are in your 20s, you have the best opportunity to shape your future. Because you have fewer responsibilities now and therefore can take risks and make mistakes, you can afford to take risks and make mistakes because you can bounce back more easily.
Try out different strategies to make more money during your 20s if you want to achieve financial freedom before 30. Many ways to increase your income include quitting an underpaying job, changing careers, trying out different side hustles, and investing.
Make better financial decisions.
Although tomorrow is not guaranteed, planning for your future at a young age is important. Living as if there is no tomorrow is one of the young people’s biggest financial mistakes. This causes them to make poor financial decisions, such as never saving money and making unnecessary purchases.
Your money decisions will play a significant role in your ability to achieve financial freedom before 30. Be sure to develop good financial habits, such as creating a monthly budget and sticking to it, putting off gratification, spending wisely, tracking your cash flow, saving a certain percentage of your income, and living frugally.
Your money should also be invested in meaningful things such as real estate, stocks, mutual funds, and assets of your choice. Your investments can provide you with passive income today and in the future.
Build an emergency fund
In the event of unforeseen financial hardship, having an emergency fund will help you to protect yourself. It is impossible to predict whether your car will need repairs or whether you will have to go to the hospital. When these unexpected expenses arise, having emergency savings might prevent you from getting into debt because you wouldn’t have to take out a loan or run up a high credit card balance.
When you start budgeting, you might include creating an emergency fund in your specific savings goals. You should determine how much money you think you will need before you start a fund. In the case of an isolated incident, you may need a few hundred dollars, or you might need thousands of dollars to survive for months if your basic expenses are high. It is important to remember that the amount that is right for you may change as your financial situation changes.
Pay down or pay off student loan debt.
In your 20s and 30s, you can quickly nip a huge financial stressor by paying down or paying off student loan debt. You should aim to reach this milestone by 30, so you don’t have to worry about this debt for a long time.
Besides budgeting and saving, refinancing your student loan could be beneficial. You could lower your interest rate by refinancing your student loan, allowing you to make further payments toward repaying the loan. Additionally to refinancing, your state government or an eligible employer may be able to help you with loan repayment.
Pay down or pay off high-interest debt.
The time is now to focus on paying off your high-interest loans or credit cards if you have them. If you do not take action, your debts could easily balloon into greater amounts, causing financial hardships in the future.
A debt consolidation loan can help you consolidate your debts if you have more than one source of debt with different interest rates. Getting this type of loan can make managing your debt payments easier, but getting a lower interest rate is the main benefit.
The process of transferring debt works similarly. You can consolidate all your debt into one place, and the best balance transfer cards offer introductory offers that don’t require you to pay interest on the transferred balance for a limited time. You can use this to pay down your debt without worrying about accruing additional interest charges.
Improve your credit score
You can open up financial opportunities for the rest of your life by building credit in your 20s and 30s. You may be able to qualify for lower interest rate credit cards and loans if you have a good credit score.
Use different financial products responsibly if you want to build credit. You can establish your credit history using a credit card rather than a debit card for everyday purchases. Additionally, using the best rewards credit cards, you could earn valuable rewards such as points, miles, and cash back. You could increase your credit score if you do not fail to make payments and pay off the balance on time.
Start your retirement fund.
Young people should start saving money as soon as possible. By doing this, you’ll have a better chance of saving enough money to live comfortably in retirement. According to one of the world’s largest investment management companies, Vanguard, investing $4,500 annually from age 20 until the typical retirement age of 65 could yield over $1 million in savings.
Although every situation differs, you should start your retirement fund as soon as possible. Making frequent contributions to your 401(k) or IRA could be one of the ways to accomplish this. Set specific goals along the way for your retirement funds to help you stay on track. It is helpful to know how much you should save by age 30, 35, and so on so you can set smaller goals that will contribute to your overall goal.
Learn how to invest
Investing money is more than just saving for retirement. The process involves saving accounts, stocks, bonds, mutual funds, real estate, and more. Investing is intended to increase your wealth. This is why a relatively small amount of savings each year could amount to more than a million dollars in retirement.
You should keep in mind that all investments involve some level of risk. Due to the federal government’s insurance, FDIC-insured bank accounts are typically low-risk. However, they are not likely to generate much income. Typically, stocks have higher earning potential but are associated with more risk.
Consider using apps to learn more about investing. You don’t need much money or previous investment experience to get started with most investment
Buy life insurance
If you purchase life insurance young, you can lock in low-cost premiums and the monthly or annual payments you make. Since you’re more likely to develop health problems as you age, your premiums will likely increase.
Furthermore, if you’re married, have children, or have other dependents, you might benefit from getting life insurance regardless of age. In the case of an unexpected death, a life insurance death benefit can cover your lost income and your end-of-life expenses.
Get other insurance too.
It is also beneficial to have different types of insurance. A minimum amount of car insurance is required by most states. In the event of an unexpected event, however, it may make sense to get additional coverage to ensure your financial security. You can choose the best option for your situation by comparing quotes from multiple providers through the best car insurance companies.
Besides physical injuries, such as fractures and sprains, medical illnesses, such as arthritis, depression, and diabetes, are more commonly disabling events. Furthermore, you may want to consider disability insurance. When you cannot work due to illness or injury, this insurance can provide you with income.
Don’t be too picky
You can achieve financial freedom before 30 by earning a stable income, which is one of the first steps to achieving financial security. Unfortunately, many people in their 20s are picky about the jobs they will take. Some believe a stable income is only possible with a traditional 9-5 corporate job. While others focus only on finding jobs in their field of study. But the problem is that being too picky can restrict your options.
You can earn an income or increase your current one by identifying opportunities and using your skills, talents, and resources to earn an income before you turn 30. Then, you can set aside a portion of that income for your future.
You don’t need to be too picky about jobs since you are still a young person with limited experience. Invest your time in gaining experience, learning new skills, networking, building your resume, and discovering your purpose.
Earn passive income or start a side business
You can earn passive income or make extra cash with some of the best side hustles if you don’t think you can reach your savings goals.
In general, passive income is a way of earning income without actively working for it other than the initial effort. Passive income can be earned in various ways, including real estate investing and creating an online course.
A side hustle is something you do on the side of your regular job. It could be as simple as starting your blog, delivering food or groceries, or renting out your car on the side.
Diversify your income streams
It is usually not easy to achieve financial freedom with one income. Additionally, depending solely on one job for your livelihood is risky. Despite unforeseen circumstances, people lose their jobs every day, businesses go out of business, you can get sick and not be able to work, and many other things can happen that cause your income to be cut off.
Creating a diversity of income streams is essential to your financial freedom journey before 30. Doing so will increase your earnings and create a safety net for your future.
Besides consulting and freelancing, you can start a side business to diversify your income. You can achieve financial freedom before 30 by starting a side business, such as driving an Uber after work, investing, creating a product, reselling things, selling your skills, blogging, and becoming a social media influencer.
Cultivate your career skills
Cultivating a valuable skill set from a young age is one of the best ways to ensure financial stability. There are multiple ways this can pay off, whether it means advancing within your field or earning more money.
To cultivate your career skills, you should learn from others, get feedback, try new things or take on new responsibilities. Invest time and effort into improving yourself in various ways because you are your most valuable asset.
Don’t spend unnecessarily.
To save money and budget, you need to ensure you do not succumb to social pressures to spend unnecessarily. One thing is buying clothes, a car, or a house because you need them, which makes financial sense. It’s another thing to live beyond your means to stay socially relevant.
Investing and making prudent financial decisions will pay off later if you focus on your savings goals. Remember that you can still enjoy life while staying within your budget. You don’t have to give up on entertainment or anything else that isn’t necessarily necessary.
Investing in the future is never too late, as they say. However, it is equally important to start managing your finances as soon as possible. You will likely make big financial decisions during your 20s and 30s that will affect your future, but it’s up to you whether those decisions will lead to a positive financial future.
You can achieve financial freedom in the future by taking steps now to prepare yourself financially, whether it’s learning how to invest or setting and sticking to a budget.