When you are in your twenties – money advice seems so irrelevant. It seems like you have a lifetime to figure out this money thing. But when it comes money advice for 20 year olds there is literally no better time to start working on the money goals you should be meeting by 30.
Specifically if you want to ensure financial wellness.
All of these major life events come at a pretty big cost. And managing them well is what money advice for 20 year olds is all about.
Because while your young, wild, and free today – your thirties come quite quickly.
And the cost continue to pile up.
Money advice for 20 year olds (why your 20s isn’t too early to start).
While buying a house, starting a family, planning a wedding, or even retiring may seem super far away – it’s not.
And it seems to feel so much closer as soon as you cross the 30 mark.
Happy 30th… now how are you going to afford the lifestyle you want live?
Regardless of where you are in the journey, it’s always best to start now.
Because let’s face it there will always be a reason not to.
20 or not, where do you start?
Money advice for 20 year olds or someone of any age really starts with paying off debt as quick as you can.
Create a plan to eliminate your debt.
It sounds easier said than done, but it would be one of the first things that prevent you from reaching your financial goals. And definitely before thirty.
Paying off debt tips:
- Prioritize your debt by the lowest balance (quickest debt to pay off). Or by highest interest rate (most expensive debt).
- Keep track of your progress. Use a debt tracker to visualize not only where your headed. But how far you’ve come in order to stay motivated.
- Avoid taking on more debt. Cut up cards if you have to, delete the credit card information from favorite stores, or any other method to help you stay committed.
Money advice for 20 year olds: should you refinance student debt?
Money advice for 20 year olds – establish the saving habit.
In a world of consumerism the habit of make money, spend more, and make more money can quickly lead to financial disaster.
Overtime that habit leads to lifestyle inflation.
You know the kind, every time you make more money you just end up spending more while your lack of savings account suffers.
These money habits may start in your twenties but they can follow you for a lifetime.
After all once you become accustom to spending more it’s harder to reign in the spending.
Not impossible… just harder.
That’s why starting the habit of saving when you are in your twenties is so crucial.
Because if you spend less than you make, you’ll always be ahead.
These two stats stem from spending more than you make and not establishing the saving habit.
Knowing this I’d say great money advice for 20 year olds is to keep your costs low for as long as you can.
So you can pay off debt, save money, and accomplish those big goals you have.
Money saving tips:
- Keep a separate savings account.
- Always have an account buffer to avoid overdrafts or dipping into your savings account.
- Automate your savings amount.
- Create an emergency fund.
When it comes to establishing an emergency fund the rule of thumb has always been three to six months’ worth of your essential living expenses. With the cost of living increasing six to nine months seems safer.
But keep in mind if you are working on paying off debt then enough to cover your copays and insurance deductibles is an amazing starting point.
Good money habits, how?
You may be asking yourself how exactly you establish good money habits. And the key is to always be aware of where your money is going.
Among a few other things like spend less than you earn and take full advantage of compound interest.
But it starts with knowing the ins and outs of where your money is going.
To know where your money is going, you need some type of spending plan.
Call it what you want. I know the dreaded “B” word isn’t exactly a favorite.
Then take that habit of understanding your money a step further by knowing where you stand financially.
You can do that by using Personal Capital, a free tool to see a snap shot of your financial life. This a great opportunity to make changes based on your financial objectives.
With Personal Capital you can see all of your accounts in one place.
Gosh that’s convenient.
Avoid multiple sign ins and doing the math yourself.
Instead use Personal Capital to monitor your savings account, retirement account, investment accounts, and any other accounts you have.
You can even use this account to budget. And be aware of your net worth.
How old will you be before you can retire?
It seems a little crazy to start thinking about retirement with less than a decade of working experience under your belt.
But the earlier you want to retire or if you ever hope to retire the sooner you gotta start contributing to a retirement account.
- Contribute early.
- Contribute something, because with the power of compound interest that amount will multiple over the decades ahead.
- If possible, and at the very least try to contribute enough to earn a full employer contribution match. Typically this means contributing 5%-9% of your salary towards retirement. That may sound high, but not maxing out your employer’s contribution would mean you are leaving free money on the table. Um who throws away free money? Please say… not you.
If you have already started contributing to a retirement account, then you should have it checked for free by Blooom. It’s a free service that analyze the risk you are taking in comparison with your age as well as uncover hidden fees.
Resource: How much do you need to retire?
Is your credit costing you money?
If you haven’t checked your credit score or history lately it might end up costing you money. Since your twenties is comprised of student debt and scraping by it’s quite possible that your credit has taken a hit.
Use a Credit Sesame, a free credit score and history monitoring app to know where you stand.
Having a healthy credit score can be the significant different between negotiating a low interest rate or being saddled with security deposits, high interest rates, and mandatory down payments.
The best part about this free credit app is that it provides tips so you can not only monitor your information but improve your credit score and history.
Before you think that having a high credit score or healthy credit report is something to worry about later.
Just consider that your credit will be a deciding factor when you want to rent an apartment, search for a job, buy a home, take a loan, buy a car, along with other major decisions.
Grab your credit score and report for free, here.
Money advice for 20 year olds isn’t all about not spending, but it does concentrate on spending smart. Practice spending consciously.
Spend on the things you love and can afford.
One of the biggest reasons why many struggle financially is because they spend for the sake of spending. Or without realizing it.
And then when a large expense comes around or any expense of that matter– they can’t afford it. Not because they can’t actually afford it but because they didn’t prioritize what was actually important.
How to spend smart:
- Before making a purchase, ask yourself if you actually need it or want it.
- Avoid one step check outs.
- Avoid impulsive shopping by walking way for a day or so before actually making the purchase. If you really want it and can afford it after a few days then at least you’ll know for sure.
- Understand how long you have to work in order to pay for what you want to buy. Did you work a whole week to buy that one thing?
- Use Ebates, a free cash back site with over 2,000 plus retailers listed. Earn cash back on purchases you were already planning on making. Plus, you get $10 just for signing up.
- Before heading out for any shopping spree – make a list and stick to it (even if it’s online shopping). If your shopping for groceries, toiletries, or even travel – use Ibotta to look up cash back offer opportunities for free. Aka more money in your pocket to spend on the things you love. Bonus: get $10 in your account, sign up for the free app here.
You aren’t born with financial knowledge. And most of us aren’t lucky enough to be taught.
Check out these financial books so you can get money smart.
For money basics: Rich Dad Poor Dad
For investing (the easy way) : The Simplest Path to Wealth
For money, budgeting, and relationships : The Broke Millennial
Regardless if your twenty or not, these money tips apply.
The earlier you start the more empowered you will feel about your money instead of powerless.
Start making money decisions that create great financially savvy habits for years to come.