Smart money moves to make in your 20s

The 20s are said to be a defining decade. For many, it's the first time moving away from home, learning crucial life lessons, and receiving the first paycheck.

In addition to all these exciting milestones, it's also the decade where you'll embrace the responsibilities of adulthood such as building a solid financial foundation for the future.

Read ahead for the steps to take to help you successfully manage your finances over the coming years.

Create a budget and get into the financial flow

While it may sound cliche, planning your finances starts by creating a budget.

Tracking how much money comes in and out of your bank account every month will not only help you save toward financial goals but also ensure that you don't run into a negative balance.

When it comes to budgeting, there are many free online resources and apps that can help automate the process.

If you prefer to plan your own monthly budget, refer to the 50-30-20 rule which advocates splitting your income into three main categories:

• 50 per cent should be spent on your essential needs;
• 30 per cent should be used for discretionary spending;
• 20 per cent should go towards your savings, investments, and emergency expenses.

Suppose you earn $5,000 a month, after all taxes and deductions.

According to the rule, $2,500 should be spent on your needs, $1,500 should be used for your wants, and the remaining $1,000 must be used for your savings and investments.

Of course, this is easier said than done. But it is possible to follow this plan if you allocate your money based on the bracket an item falls into.

The good news is that once you create a budget, half of the work is done. Remember to occasionally check-in with your budgeting goals and adjust your budget as your income changes.

Maintain a good credit score to unlock benefits

Having a good credit score will let you qualify for the best home loans, personal loans, credit cards, and more.

In other words, your credit score can be a determining factor for whether or not you qualify for certain financial products.

In turn, this can impact how much money you save on interest payments or the credit card perks you receive.

Wondering what it takes to build a good credit score? For starters, spend within your means and pay your bills on time every month.

It's also important to keep your credit card balance low as well as check your credit report throughout the year.

Build an emergency fund to save for uncertain times

Establishing an emergency fund can help you cover unexpected costs such as medical bills or an urgent repair for the home.

During times of uncertainty, instead of applying for personal loans and comparing interest rates, your emergency fund will provide a financial cushion.

When it comes to starting an emergency fund, consider opening a high-yield savings account and begin with an achievable financial goal.

For example, if your goal is to save up to $1,000 a year, you can work backwards and plan to save $20 every week to meet your annual target.

It's a good idea to focus on saving as much as you can afford, after taking into consideration your monthly living expenses and bills.

Choose the right investments and insurance

A holistic financial plan will include investments and insurance. When it comes to investments, there are several types ranging from stocks and bonds to property.

Similarly, there are different kinds of insurance plans such as health insurance, car insurance, home insurance, and more.

However, there's one type of insurance that is often overlooked: Resale Endowment insurance.

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A resale endowment policy is an insurance plan that was sold to a third party broker by the policyholder. The third party vendor then resell these existing endowment policies to investors.

The main difference between a resale endowment policy and a new endowment policy is the commitment period. If you prefer a shorter period of commitment, a resale endowment policy could be the right option.

Vendors or brokers like REPs Invest look for investors who want to benefit from an endowment policy but don't want to spend 25 years before seeing the fruits of their efforts.

This also means that you can enjoy the lump sum payout much more quickly at a higher return value.

Regardless of whether you adopt some or all of the tips highlighted above, making smart financial decisions begins in your 20s.

By planning ahead and taking the right steps today, you'll be able to achieve your future financial goals.

This article was first published in ValueChampion.