Financial plans to implement at the age of 25

Lynn Prins

They say life begins at 40, but it could be safe to say that your financial life starts a little earlier at the age of 25.

The reason for it is that your teen years are gone and most people start focusing on the future when a quarter of their life has passed and let’s face it, you’re a grown up now.

Starting at 25 to really focusing on how you used and abuse your monthly salary is as good a time as any. You are in good health, little to no commitments and still have ample opportunity to save, invest, plan and prosper.

In your teens and early 20s, you probably made the most of life and enjoyed the independence and freedom that came with earning your own income. However, once you pass over the threshold of 25 it is time to also take on the responsibility which comes with that financial freedom.

“How?” you may ask. By implementing responsible spending and savings habits. This includes the use of a budget, an investment plan and an instalment plan to pay off any debt that may inhibit your financial freedom.

So how do you start your financial plans at age 25?

Determine your short, medium and long-term goals.

  • Short term goals are for the next five years and could include a wedding, honeymoon, new car and new furniture.
  • Medium term goals are things like owning your own home and paying for your children’s education.
  • Your long term goals are what you want to get out of retirement, this could be travelling, a big home, or just living comfortably.

It may be very difficult to start saving for retirement now, as you may feel you are years away from retiring, but if you look closely at some pensioners and their daily struggles, you may agree that starting sooner is better than later.

Once you have decided on which each goal should be at a given period of time, then you should be able to make an estimation of how much saving is necessary for each goal.

Here’s how a 25 – year old can meet their financial goals:

If you start implementing financial plans now to have the life and financial future you want for yourself and your family, then count yourself a lucky 25-year-old because you still have enough time on your side to reap the rewards one day.

However, this can only be possible when you start creating a budget and putting away money in your savings for your short, medium and long-term goals.

Make sure you have a budget in place that you can stick to, and a budget that doesn’t allow you to miss out on too many luxuries or entertainment, because falling off the budget wagon can cost you.

You also need to start looking at what else you can do with your money to make it work harder for you. You may want to start by looking at term deposits, or certificates of deposit where you can invest a certain amount of your savings at a fixed interest rate for a guaranteed return over a set term.

Just remember that you won’t be able to access those funds during that term, which could be just the incentive you need to force you to continue saving.

Three possible financial plans at age 25

Get familiar with insurance policies that could benefit you

Remember that financially anything can change between the age of 25 and retirement, and since your income is your biggest asset, perhaps one of your financial plans should be to take out Life Insurance or Income Insurance Protection.

Applying for Life Insurance and Income Insurance Protection means you will be covered should there be any changes that could affect you and your family financially.

Life Insurance will protect your family financially should an event occur that leads to your death, and Income Insurance Protection will protect you if you become ill and unable to work.

Ready to buy a house? Paying off your home is important

Your first home will also be a big part of your financial plan if you are 25 years old since you will need to prepare your salary for a future mortgage. This may include working hard for that promotion at work so that you are able to meet the monthly mortgage payments.

Before you start looking for your first home and you fall in love with a property you can’t afford, speak to a bank or mortgage broker to find out exactly how much you can afford to borrow – not how much you are eligible to borrow, but how much you can afford to borrow while still maintaining your lifestyle and your savings and investment plans, and accounting for any emergencies.

Bought a house…continue with your savings and investments

Are you repaying a mortgage on your home, well then you should continue to maintain your savings and investment plans.

For a successful financial future and a fruitful retirement, you need two things – to own your own home so you’re not paying a mortgage on your pension, and to have a passive income stream from your investment so you don’t have to rely on the pension and have enough funds to fulfil your dreams.

Your investments can make your money work harder for you as you work hard to build the life you want.

Keep in mind, although achieving financial independence is a goal most people strive for, it is not necessarily easy, but it is achievable if you understand your priorities, set achievable goals and take the proper steps toward reaching them.

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