Youth, especially in your 20s, is one of the most dynamic phases of life.
Some people are still busy embracing the YOLO (You Only Live Once) lifestyle, while others begin to realize the harsh realities of working life.
At this stage, we are often faced with various choices, from careers and relationships to managing finances. All these decisions will shape who we become in the future.
One quote worth reflecting on is:
“Youth is the best investment. What you sow in your 20s shapes your future.”
This means that what we do during our youth will significantly determine our lives in our 30s, 40s, and beyond.
Therefore, having clear principles, especially in financial matters, is very important. Below are five financial principles that can help you build a more secure future.
1. Live Below Your Means
This principle may sound simple, but it is often difficult to implement in practice.
Living below your means means managing expenses so they don’t exceed your income. For instance, if you earn IDR 5 million per month, your expenses should ideally not exceed IDR 4 million. The remaining IDR 1 million can be allocated for savings or investments.
However, reality shows that many people live beyond their financial capacity. Data reveals that over 50% of online loan users in Indonesia are millennials and Gen Z. Another survey indicates that many Indonesian workers exhaust their salaries within the first week after payday. This underscores the prevalence of consumerist habits.
Tips for Living Frugally:
- Make an Expense List: Start by recording all your needs, such as food, transportation, housing, and utilities. Prioritize based on importance.
- Cut Unnecessary Expenses: Limit café visits, cancel subscriptions you rarely use, or reduce impulsive shopping.
- Use Budgeting Methods: A popular method is the 50/30/20 rule, where 50% of income goes to essentials, 30% to entertainment or desires, and 20% to savings and investments.
If, even after living frugally, expenses still exceed income, it may be time to consider the next principle.
2. Grow Your Income with a Side Hustle
In your 20s, energy and time are your greatest assets. One way to maximize these assets is by earning additional income through a side hustle.
Not only does this increase your income, but it can also help you explore your passions and skills.
Examples of Side Hustles:
- Freelance: If you have skills like graphic design, writing, or photography, seek freelance projects on platforms like Sribulancer or Fiverr.
- Online Selling: Start by selling food, clothing, or handmade products. Use social media or marketplaces to market your products.
- Content Creation: If you enjoy sharing stories or information, try becoming a content creator on platforms like YouTube, TikTok, or Instagram.
Running a side hustle isn’t easy and requires extra effort. However, ask yourself this: would you rather work hard now while young or struggle financially into your 50s? By utilizing your time effectively, a side hustle can be a path to financial stability.
3. Invest in Your Skills
This principle is critical but often overlooked. In the workplace or business, your value is determined by your skills.
If you want to earn more, you need to continually enhance your skills.
Ways to Invest in Yourself:
- Take Courses or Training: Many affordable or even free online courses are available, such as on Coursera, Udemy, or YouTube. Choose courses relevant to your job or passion.
- Develop Soft Skills: Besides technical skills, soft skills like communication, personal branding, and negotiation are equally important. These can help you build networks and advance your career.
- Explore Your Passion: If your current job doesn’t align with your interests, explore new fields. For example, if you enjoy cooking, create recipe content or start a small food business.
Investing in yourself is a long-term investment. With better skills, you can increase your value in the job market and open up greater opportunities.
4. Invest Early and Stay Consistent
The sooner you start investing, the greater the potential returns you can achieve. This is due to the power of compound interest, where your gains grow exponentially over time.
Steps to Start Investing:
- Set Financial Goals: Are you saving for a house, marriage, or early retirement? Your goals will help determine the right investment instruments.
- Choose Suitable Instruments: If you’re a beginner, start with low-risk options like money market mutual funds. As you gain more knowledge, you can try stocks or bonds.
- Be Consistent: Allocate a portion of your income regularly for investment. For instance, set aside 10% of your salary every month for investment.
Remember, it’s never too late to start investing, but the earlier you begin, the greater the benefits you’ll reap in the future.
5. Avoid Get-Rich-Quick Schemes
This final principle is equally important. In today’s digital era, get-rich-quick schemes are easy to find, especially on social media. From fraudulent investments to online gambling, these schemes promise significant profits in a short time.
How to Avoid Get-Rich-Quick Schemes:
- Research Before Investing: Ensure the company or investment product is officially licensed by the Financial Services Authority (OJK).
- Don’t Be Easily Tempted: If something sounds too good to be true, it likely isn’t.
- Understand the Risks: Before investing, ensure you understand the potential risks. Never invest money you aren’t prepared to lose.
Money earned easily often disappears just as quickly. On the other hand, building consistent saving and investing habits yields safer and more sustainable results.
Conclusion
The five financial principles above are not easy to apply but can significantly impact your future.
Living frugally, earning additional income, investing in yourself, starting investments early, and avoiding get-rich-quick schemes are practical steps to achieving financial stability.
Remember, youth is the best time to invest, both financially and in personal development. By following these principles, you can build a brighter and more secure future.
Start now, as every small step you take today will have a significant impact on your life in the future.
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