Young people are less likely to have a job with a retirement plan, but even those who do are less likely to save. Money topics like budgeting, how to make wise money decisions, long term money goals, short term money goals, savings, and most importantly, investing are usually not discussed with young adults in Africa except but a small percentage who are seen to be privileged.
As an African in your 20s, you would usually fall within these three categories; a fresh university graduate, an employee at the edge of kicking off your career, or an entrepreneur trying to figure out how to get started. Regardless of where you belong, you must have accepted and come to terms with the money truths, so it is time to start getting serious about managing your money, and here is how to get started.
Make a realistic budget
List your income and expenses. A budget helps limit expenses to disposable income. Once you have developed this discipline, the next step is to include savings. It is first important to track, list, and categorise your expenses when establishing a budget, as this will help you eliminate expenses so you can save money.
Build an emergency fund
In the early years of your career, your income can go up and down as you explore your options. An emergency fund will protect you against these uncertainties. Set aside the emergency fund before saving money for another use. Be disciplined when using the funds and know how to replenish them when you use them. Periodically review your emergency fund requirements to match your current income needs. In this absence, you risk getting into debt and harming your finances.
Start saving for retirement – now!
Young people are less likely to have a job with a retirement plan, but even those who do are less likely to save. The money invested in your twenties has a lot more time to grow, so you may not need to save so much money later in life. A person who saves money for 10 years from age 25, assuming steady growth, will retire with more than someone starting at age 35 and saving for the next 30 years.
In other words, you can save 10 to 15% of your income in your twenties or wait and save 25% or more in your late thirties to get the same result. Wait even longer, and by the end of your 40s, you will need to put aside 35% of your income to catch up.
Spend less money with a debit card
A debit card can be a useful tool for managing your finances. To build good money habits, you’ll need to use it wisely. Having the right mindset and understanding of your spending helps keep your expenses in check. You may have money left over in your budget to save and pursue goals.
Start investing
It is amusing to see how many young Africans think it is wise to invest in your 40s or 50s when you have millions in your account. The truth is that investment is now easier, and everyone can start an investment plan. Financial institutions now facilitate any investment, just find the one that is verified and effective and start investing.
