Financially Savvy Moves for Your 20s

Everyone knows the adage, “Time is money,” and that adage certainly applies to making the most of your money in your 20s. Managing your finances for the first time can be overwhelming. Those in their 20s have the greatest financial asset of all – time. Time makes money grow when it is invested wisely. The sooner you start making a financial plan, the brighter your future will be. Here are several financially savvy moves for 20-somethings.

  1. Set financial goals. Put them in writing, and calculate how much you’ll need to save monthly to reach your goals. Remember to make note of the big and small financial goals – from going on spring break next year to retiring early.
  2. Make a budget and stick to it. Limit debt to your ability to pay it off. Monthly credit payments (not including mortgages) should not go over 20% of your net income. Also, start by paying off existing bills before incurring new ones.
  3. Start building an emergency fund. This should be equal to three to six months of living expenses and should be used ONLY in the case of an emergency.
  4. Save at least 10% of your gross income. Put it in your emergency fund, toward future goals and retirement. If you can’t make 10%, start smaller and work up to 10%. Saving any amount is better than none.
  5. Take advantage of the financial services your bank or credit union offers to you as a customer/member.
  6. Get proper insurance. This includes health, disability, auto, renters/homeowners and life insurance. It is very important to avoid buying insurance you don’t need in your 20s.
  7. After you’ve completed steps 1-6, start investing small amounts of your savings. Do this gradually over time, with sensible contributions.
  8. Save money for retirement. I know retirement isn’t even a blip on your radar screen. But it will never be easier to start saving than right now. Use tax-advantaged savings plans from your employer like 401(k) plans, or open individual retirement savings (Roth IRA) plans from your bank or credit union.
  9. Build up your credit history. You’ll need to take on some debt because having no credit is as bad as having bad credit. Most importantly, show you can manage that debt in order to build up your credit history and earn yourself a good credit score.
  10. Write down short-term, midterm and long-term goals. I’m not suggesting you need to map out your whole life. However, having an idea of where you want to go in life will make it easier for you to make smart decisions with your money. With that in mind, jot down where you want to be in one year, five years, 10 and 20 years. Your personal goals can be things like marriage, children, travel, career, homeownership, etc.
  11. Plan to pay cash for everything. I think being able to pay cash for everything can be life changing. Tell yourself you’ll be the person who always pays cash. That doesn’t mean you won’t ever take out a loan or get a credit card. But it does mean you will think a little harder before going into debt.
  12. Keep your job skills fresh and up-to-date. This will keep your job options open and will allow for salary increases.
  13. Save all financial files. Do so in an orderly and easily accessed system so you have them readily available when you need them.
  14. Quit the Bank of mom and dad. It’s time to set your parents free from your financial responsibilities. In your twenties, the main goal should be becoming self-sufficient. So, look to get off your parents’ payroll and onto your own.
  15. Clean up your online presence. Whether you like it or not, your social media activity is viewable by the entire world, including all your current or potential employers. Get your digital act together by searching for yourself online at or to see what is already out there for people to see.

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