You just graduated from college, and feel the joy of freedom from early morning lectures, the stress from tests and caffeine filled nights. Your hard work has now paid off with a respectable job with paid vacation and benefits and you pledge to live for the weekends, and live to the fullest from here on. Your feeling of self worth is at its peak, and you feel you owe yourself a reward for all the hard work you put in.
Many of us have experienced this phase in one form or another, and cherished the feeling of being independent after holding that first paycheck. However, a large group of people go overboard in rewarding themselves only to realize there is no way to go back to the starting line. Buying the latest expensive car, gadgets or spending lavishly during weekends on drinks and dinner to taking those cruise trips charging massive amounts to your credit card. While I agree with the YOLO philosophy, one must be cautious to prevent themselves from a lifetime of hardships.
Nerdwallet conducted a research on average spending based on age groups and found that millennials were spending an average 74% of their pretax income amounting to $48,576. To view the average spending across various categories you can find the research here
While these numbers identify a growing problem here’s 4 Reasons why saving money should be your #1 priority before turning 30:
1. You will NOT be 18 when you die
While we all enjoyed and raved about that Bryan Adams song and feel our youth each time we hear this song, let’s face it – we are never turning 18 again and neither are we a curious case like Benjamin Button.
Age often comes in tandem with deteriorating health and more visits to your primary physician as opposed to your favorite night club. While you may contest by saying you promised to remain fit for the rest of your life, but the harsh reality is that age is faster to catch on than any latest fitness trend !
Paying hefty amounts towards medical bills can be painful even if you have had the tiniest of investigative procedures. During these times, you would only wish to have skipped the triple priced drinks at the bar for a walk in the park.
2. Studio Apartment to your New Home
There will come a time in your life when you will transition from being single and independent to starting a family, where you decide to ditch that old studio apartment and buy into a real home. Not only will your savings help pay off the down payment for a new home, but will save you several thousands in added loan interest during the term of the mortgage. Homeowners also need to account for repair and maintenance costs equivalent to 1% annually of their home value. Your savings will save you from adding another debt in times of unexpected emergencies. Money Saved is Money Earned!
3. The Family
Your expenses are going to skyrocket and you may lose track of your purchases when you have a family to care for. With increasing expenses towards food, clothing, school and health insurance, knowing you have it all in place will save you from the unwanted stress of managing your finances. Having the ability to take that long awaited trip will make you proud of your decision to save in your early 20’s.
Simply being aware of your financial standing and having maintained a hefty corpus will offer you a sense of security. Not only will this peace of mind make you a relaxed and happy person, but will promote greater growth in your professional life. When you are less occupied worrying about paying those utility bills, you can focus on new opportunities, learning a new skill and even have the ability to take a sabbatical to explore your interests. Having this kind of financial stability will present an outstanding balance in your personal and professional life.
You must certainly reward yourself and live each day to its fullest, but be cautious if you wish to make this enjoyment last for a lifetime. Realize the importance of balancing your financial and emotional well-being before you make any irrational decisions.
Be Frugal, Be Smart, Be Rich!