Our 20s are a weird time. For many of us, it’s when we graduate from university or college, get our first real jobs and start learning to be our own independent people. That means flying solo, without the financial safety net our parents might provide. Chances are you’re beginning to hear people talk about the importance of saving for retirement and the amazing power of compound interest — and a whole lot of other stuff.
There is a ton of information out there about what you’re supposed to do in your 20s. It can be overwhelming. We’ve selected the five most important (and achievable!) goals that you can and should reach in your 20s and we even have an app that helps you achieve them. These are goals that are practical, doable, and not so far into the future or out of the realm of possibility that you feel like giving up before you start. Are you ready? You got this.
1. Build an emergency fund
If you’ve read our guide to building an emergency fund you’ll already know why it’s important. Car breaks down? Phone falls into the ocean? You shouldn’t have to go into debt to cover a minor emergency. While it may seem like common sense to have a just-in-case fund, a 2016 survey by the Canadian Payroll Association found that 48% of people would be hard-pressed to cover their bills if their paycheque was a week late. Your 20s are already a period of uncertainty, it eases a bit of the anxiety to have a safety net.
What should I do now? Start small — just $50 a paycheque will do — until you’ve built a savings habit. Most experts recommend having three to five months of living expenses put aside. But even a $2,000 fund to cover an emergency flight out of dodge is a win in your 20s. It's super easy to create a personalized Savings Goal in your KOHO app, and you can set up automatic daily, weekly or monthly contributions to make saving effortless.
2. Pay off your student loan ahead of schedule
Finished school with a huge student loan to pay off? You’re not alone. The National Graduates Survey (done every 5 years) has found that the average student graduates with $28,000 of debt at the time of graduation. This is just your Bachelor’s degree too!
Here’s why you should attack that debt like the video game boss battle it is: When you enter repayment for student loans, the government assumes you’ll pay it off in 10 years and sets your monthly payments accordingly. Can you imagine where you’ll be in a decade? If you think you might want to buy a condo down the line, it’s going to be harder if you’re still paying for your degree. Hammer that debt down as aggressively as you can.
What should I do now? Rather than paying the minimum amount every month, see how much you can afford. Customize your monthly payment and send in lump sums when you have extra cash. Got your tax return? Send it to the government. It’s pretty much guaranteed savings since you’re freeing yourself from paying all that interest down the line.
3. Pay off your credit card debt
Oh, plastic money. There’s a scientific reason it’s so easy to tap a card and pay for a burger, a pair of jeans or a new phone. It’s called pain of paying. We feel real pain when the depletion of our resources (A.K.A. our money) is visible and not hidden, as it is when we pay for things with a credit card. A joint Carnegie Mellon, Stanford and MIT study proved this when researchers used an fMRI scanner to measure people’s brain activity as they contemplated spending decisions. "Credit cards effectively anesthetize the pain of paying," wrote George Loewenstein, a social and decision sciences professor at Carnegie Mellon and one of the study’s co-authors. It’s easy to rack up credit card debt in your 20s. Your goal should be to clear out the debt as soon as possible.
"There’s a scientific reason it’s so easy to tap a card and pay for a burger, a pair of jeans or a new phone. It’s called pain of paying."
What should I do now? If you’re already in debt, make paying it off your top priority. In fact, do this before you start on your student loans. Most credit cards charge 20% interest, whereas student loans charge either a floating rate (currently 5.7%) or a fixed rate (currently 7.5%). According to TransUnion, the average credit card debt at the end of 2017 was $4,069. That means it would cost you more than $400 in interest if you took a year to pay off that debt.
4. Save for your next vacation
Did you think all of these goals were going to be practical and boring? In the midst of adulting, there's still room for fun. And research suggests spending money on experiences, as opposed to stuff, makes us happier in the long run. According to Cornell psychology professor Dr. Thomas Gilovich, who published his findings in the Journal of Consumer Psychology, there are a few reasons for this. Tangible experiences connect us to other people socially and reduce our tendency for social comparison. For instance, you might feel upset if someone told you they got the exact phone you did but for $100 less, but you’d probably just shrug if they said they had a better vacation than you did. After all, writes Gilovich, “you had your unique experience, you have your memories, and you would not want to trade them for someone else’s.”
What should I do now? Start planning (and saving) for your dream vacation! KOHO will help you figure out how much you’ll need and when you can go by creating a Savings Goal. Remember that stuff about the pain of paying? Well, you’re going to feel a lot more pain paying for a vacation you charged to your credit card than one you saved for in advance.
5. Figure out what actually makes you happy
We're not saying that you need to have your entire life figured out by the time you hit 30. Just figure out what actually makes you happy and make sure that’s what your money is going towards. In his book, Moolala, personal finance guru Bruce Sellery talks about the importance of creating your own context and figuring out what you want to use your money for. Is it for travel? For family? For adventure? If you know what your priorities are when it comes to spending money, you’ll make choices that make sense for you. You’ll be maximizing your spending happiness.
What should I do now? You know yourself best. Ask yourself what it is that makes you happy. That way you can look at what you’re spending money on and decide whether those purchases add happiness to your life. Those Uber rides? Well, if you value those extra minutes at home, then maybe that’s not a bad spend. But if it’s just because you always sleep past your alarm, it could be time to set up a KOHO Savings Goal and change those habits.
Tinuke is a behavioural economist with her Ph.D. in Community Health and Health Behaviours. She currently lives in Toronto, ON.