Aim for 6 Money Goals by Age 25

Have you ever considered money goals by age?

Some 20-somethings still scarf down low-cost Kraft dinners while seated on the same sagging futon they had in undergrad. Others have saved a comfortable nest egg as well as sufficient credit to qualify for a mortgage. How do you become more like the latter and less like the former?

The smartest money moves occur early in life while years stretch ahead seemingly endlessly, leaving plenty of time for interest to compound. Make the following six savvy moves in young adulthood and reach your money goals by age 25.

1. A Plan to Pay off Student Loans

Student loan debt makes up a sizable chunk of change for many. And the longer you take to pay down the balance, the more interest accrues. This process can result in paying thousands more over the course of your loan.

Create a monthly budget and dedicate a certain amount above the minimum payment to eliminate student loan debt more quickly. Does cash burn a hole in your pocket like wildfire? Set up your direct deposit at work to direct a specified amount to a separate account you use only for paying down debt.

2. An Emergency Fund

Life happens. Job layoffs, car troubles and sudden medical expenses can throw anyone for a financial loop. Being prepared with an emergency fund means taking such inconveniences in stride.

Many Americans today lack sufficient liquid cash to handle a $400 emergency without turning to credit cards or personal loans. While the interest you earn on an emergency savings account may seem paltry, compared to the interest you’d pay on credit cards, the low return on investment of liquid savings is well worth it.

3. Start Golden Year Planning Young

Talk to anyone over the age of 60, and they’ll tell you the time flew by in no more than a blink. Starting a retirement savings early makes sense for several reasons. One, starting young means having those additional years to stow away the bucks like a squirrel piling up nuts for winter. Two, you’ll take advantage of greater interest as it compounds over the years.

If your employer offers a retirement plan such as an IRA or 401(k), contribute the maximum allowable without incurring a tax penalty. Self-employed? Speak with a financial advisor about developing a plan for yourself.

4. Get Comfortable With the Stock Market

Historically, the best way to make your money work for you is to invest in the stock market. Even high-yield savings accounts pay little more than two to three percent interest, while the market averages far greater returns over time.

Keep in mind the key phrase — over time. Resist the temptation to sell when the market falls. Many of today’s wealthiest individuals earned their millions by staying the course when the market tanked. Investing young means having plenty of time to recoup your losses when the market rebounds.

5. Establish a Positive Credit History

Your credit rating in early adulthood may not contain a single missed or late payment, but you may find yourself rejected when trying to buy large items such as a car without sufficient collateral. Think of your credit rating as a blank slate: Lenders don’t know whether what you draw there will turn out more like the Mona Lisa or a stick figure.

Strive to obtain at least three credit cards by the age of 25. Use them often — but only on those items you can afford to pay off in a months’ time. Doing so will establish you as someone with strong debt management skills. Carrying hefty balances while making only the minimum monthly payment will decrease your score.

6. Plan a Path to Home Ownership

Home ownership isn’t for everybody, but owning real estate means earning equity from your largest monthly bill instead of fattening your landlord’s wallet. Additionally, few people look forward to paying rent in their 70’s or 80’s. Owning a home means having a comfortable place to retire as well as a financial asset to pass on to your children someday, should you have any.

Building Financial Strategies for Life

Building financial independence means making smart money decisions at a young age. With a bit of planning, anyone can retire a millionaire — but those who start early like the proverbial bird enjoy a much fatter worm. These money goals by age should inspire you to find stability every year of your life.