These are the 5 financial lessons you should know before the age of 30

Youth is the worst time to handle personal finances. Uncontrolled overnight spending, unnecessary shopping and whims, coupled with a lack of experience and preparation, make the youngest the least equipped to control their money.

The other side of the coin shows a different reality: 30-year-olds are in the middle of their working life. In other words, these workers only have another three decades to generate income and learn how to manage it. Otherwise, they will not be prepared for retirement.

In this sense, Insider offers five tips for inexperienced savers to learn to control their money before it’s too late.

1. Stick to a budget

Many young people have proposed create a budget and follow it strictly, but very few end up paying attention to the spending guidelines that they have set themselves.

Twenties are a time of waste. However, it should be the period in which the young person prepares to be able to become independent and start a life away from the financial security that parents provide.

For this reason, these workers have to start creating budgets, knowing exactly where every penny goes, and stick to that spending plan. However, this does not prohibit creating a small section within the table for entertainment and travel.

2. Save between 10% and 20% of monthly income

The vast majority of experts in the field recommend carrying out this practice. First of all, you need to know that personal finances are built on a foundation: fixed expenses and variable expenses.

Fixed expenses will be repeated month after month, such as rent or mortgage. On the other hand, variable expenses are contingencies that occur in specific months or payments that, although they are repeated frequently, vary greatly in their amount. Taking this aspect into account, experts recommend allocate 80% of the monthly income to these two places, which would allow the remaining 20% to go to a savings plan.

However, taking into account the employment situation of a large part of young Spanish people, this percentage can be reduced to 10% when the budget is very tight.

3. Be realistic with financial goals

Your 20s are also the time to create an afterlife, to sit quietly and think of an action plan. These young people must ask themselves “What do I want to do with my life?”

If the plan is to buy a house and a car, it is time to plan finances to be directed toward that end. However, the idea can be much smaller. If the plan is to take a trip to an exotic country, a good financial plan will meet the goal in one or two years.

The important thing is to be realistic with the established goals, which are according to the income generated, and start creating a savings plan to achieve them in the medium or long term.

4. Pay off debts

Many people live in the culture of indebtedness, applying for loan after loan and generating too large long-term payment duties. Unfortunately, little can be done to avoid this debt. However, you can create a crash plan to address it.

Experts recommend listing all debts from lowest to highest, regardless of interest rate. From here on, these young people should make the minimum payment on all your debts, except for the one of lesser value.

This practice will have a significant impact on personal finances and will allow the budget to expand, thus increasing the ability to save.

5. Start an emergency fund

Unforeseen events are a reality, they are part of everyone’s day-to-day life, so you have to know how to deal with them. Experts advise creating an emergency fund. That is to say, allocate a small part of the monthly income to create a section dedicated to contingencies.

Otherwise, these young people will most likely have to use their savings to cover unforeseen expenses, which will prevent them from following the budgets set out above.