Your 20s and early 30s mark an exciting and carefree time in your life as you start a career, open accounts and buy your first house or car. It is important to remember, however, that this is also the time to start planning for your future financial well-being. Below are some tips on how you can develop the best financial plan to suit your needs, now and in the years to come.

Creating the foundation for your financial well-being

There are four pillars needed to create a strong foundation for your financial future: getting out of debt, not getting caught in the ‘flash’ trap, protecting yourself financially, and setting goals. Let’s have a look at these in more detail.

Getting out of debt

When you start your first job, the chances are that you’ll have student debt of some sort and financial institutions will start giving you credit. Make sure you start paying off your debt from your first pay cheque. Debt essentially creates a weight to you building wealth in the future, so try to maintain a healthy level of debt, while paying off your store cards, student debt and your credit card.

In as much as you need to build a good credit rating, it is important to note that you need to get out of debt to build your financial future. It is all fine to have credit but you still need to use it responsibly. It is about having access to credit and paying it off in the required time. The worst that can happen is while building a good credit record, you stop paying for your debt or paying it on time. Do not be scared of credit; rather it is about building a healthy relationship with your money and budget wisely.

Don’t get caught in the ‘flash’ trap

You may have many offers from stores for cards – be wary of these offers and manage them properly if you do open any accounts. Don’t get caught in the temptation of a flashy lifestyle. Financial wealth is about a lot more than the Rands and cents. In our research, we find it is about the perceptions of money and how you see it that will set you up for your financial future. Start building healthy money habits as early as possible to set a strong foundation – know how much debt you have and how much of it you can pay off every month. Don’t give in to peer pressure to buy flashy items like expensive cars or clothes. When you buy your first car, make sure you read all the terms and conditions to fully understand the payments you must make each month and what your interest rate is.

Protecting yourself financially

Your biggest asset in your life is your human capital – your ability to do something and the earning potential that goes with this. You need a basic form of income protection (disability cover) to make sure that if something were to happen that leaves you unable to work you will still be able to support yourself financially. If you have a car, make sure it’s insured to cover your loss and the loss of others in the event of an accident. You should also make sure that you have some kind of medical aid. Generally, as a young person, you should be fairly healthy and won’t need many doctors’ visits, so hospital cover at a minimum should be appropriate at this stage in your life.

Setting goals

It is important to set yourself goals of where you want to be and what you want to be doing. Set these goals in your financial plan, and then work towards them. Direct your savings to building your future.

Finally, here are money mistakes to avoid in your 20s:

• Taking too much debt and ignoring to pay it
• Not having a budget, over-spending or failing to stick to your budget
• Living without health cover, insurance and income protection