For most of us, hitting our twenties is an exciting time!
Entering the realm of adulthood can feel like the world is opening up to you, and all you need to do is decide which part of it you want a piece of.
But it also introduces greater responsibility and issues that you probably didn’t consider when you were younger. (Were you thinking about mortgage down payments and tax brackets when you were 9? I definitely was not.)
Every age milestone we reach is going to have some kind of impact on us. In the financial sense, each decade we reach is going to signify some kind of opportunity or drawback. A lot of the time, our level of success and accomplishment is going to be measured against the average person, and the traditional race to retirement.
Financially, our twenties are notable because this is likely the first time we have some serious decisions to make, and what we choose can have significant impact on our financial health down the road.
Personal Finance in Your 20s
This isn’t meant to scare you! But in terms of things like:
- investments and compound interest
- mortgage principal
- and credit card debt
…what we do early on can either really benefit us – or severely limit us in the future.
Every age can have a huge impact on our financial prospects. What we do now will affect our lives down the road.
For the first time in your life, handling your funds might well be difficult, with daily expenses, education and healthcare, and long-term ambitions.
Some of the most common complaints when it comes to finances for people in their twenties include:
- You’ll be starting out in your career and will likely start at a lower salary.
- The cost of rentals and housing is sky high right now.
- You may already be saddled with some student debt.
- You’ll be competing for jobs with many others without a ton of experience.
So where do you start? What should you do? How do you get ahead?
Taking efforts to manage your finances as early as possible can not only help you succeed later down the line, but it will also preserve your ambitions and objectives when life inevitably throws you a lemon.
Start building good habits early on
Sounds depressing, right? It’s not!
Reframe your mindset a bit – opportunity is also on your side because you’re in your twenties. Your financial future will be brighter if you begin making deliberate financial actions as soon as possible – and you have more leeway if everything goes sideways.
It’s not to say you can’t have some fun too! We all splurge on something once in a while, and that’s also part of making your own decisions and having more money for the first time in your life. But the point is – building healthy financial habits in your twenties will set you up for life. Really.
“Developing habits, particularly in your twenties, is critical for long-term success,” John Deyeso, financial planner
So let’s get into it! Here are the basic financial opportunities you can take in your twenties to set you up for success down the road.
Personal Finance in Your 20s: 6 Basics Everyone in Their 20s Should Embrace
1. Learn about personal finance.
Other people can discover ways to mismanage your money if you don’t learn the fundamentals of how to handle it yourself.
Reading books about money can assist you in preparing your thoughts to make your best financial decisions. Rather than depending only on others for financial guidance, take responsibility and get your hands on a few fundamental personal finance books (Or blogs, or videos).
And don’t be afraid to ask experts! Financial advisors, mentors, people who you see as successful. Make it a habit to learn as much as you can about money, and you will be so much further ahead than the rest.
Helpful Resources! The Top 7 Best Personal Finance Books for Beginners→
2. Develop sellable skills.
Learning is a prerequisite for earning, as the saying goes.
You must first make money before you can start worrying about what to do with it. Consider your employment in the context of your whole career.
While it can be critical to obtain a certificate or degree in some fields, it is equally vital to add marketable skills to them. Opportunities may be provided to you, most likely because of your certification, but what you can do will maximize the opportunity.
The steps below will assist you in developing marketable skills:
- Determine which abilities will give you an edge: both hard and soft talents, including data analysis, communication, graphic design, freelancing, public speaking, and time management. It’s critical to first learn about the abilities in demand in your preferred sector, both now and in the future.
- Assess your existing abilities honestly: no one profits from exaggeration or self-deception. Instead, examine your talents and faults with a critical eye. An honest evaluation of your abilities will put you in a good position to make the necessary improvement.
- Decide if you want to concentrate on enhancing your strengths or on improving your deficiencies.
- Put in the time to improve your skills: Obviously, this is the most critical phase. The utilization of online education courses, seminars, and webinars may help you improve new skills or consolidate existing ones. This is the greatest way to set yourself up for future success.
5 Free Ways to Improve Your Resume Right Now→
3. Lay out your budget.
Financial planning is a continuous process that will:
- lower your financial stress
- meet your immediate requirements
- help you save for long-term goals such as retirement
Financial planning is vital because it allows you to maximize your assets while also ensuring that you fulfill your long-term objectives.
Establishing a budget is critical; without one, you risk overpaying on non-essential products while under-saving for major expenses.
Distinguish between your necessities, desires, and dreams. First, make a list of all of your daily costs and your regular monthly rent. When you know where your money is going, it’s much easier to figure out how to save money.
It’s also worth noting that making a budget is a crucial part of practicing self-control.
If you’re lucky, you learned this talent from your parents when you were a child. If not, remember that the sooner you master the discipline of deferring gratification, the easier it will be to manage your money.
Although you may easily buy anything on credit the moment you desire it, it’s better to wait until you’ve saved up enough money. If you have a practice of placing all of your purchases on credit cards, even if you cannot pay off your account in full at the end of the month, you may still be paying for those products in ten years.
4. Become an investor.
Investing can assist you in the beginning to acquire money.
There are two major methods to create money:
- actively by working for it
- passively by saving or investing your money in stocks, bonds, real estate, or other financial instruments
Enroll in an investing fundamentals class, visit with a financial planner, or speak with a trusted friend or family member who has dealt with similar issues.
While investing entails risk, investing regularly and properly distributing your funds among assets in the proper ratios can help you maximize your earnings while limiting your losses. Investing now can get you more than investing later.
It’s also necessary to seek new sources of income. Insufficient income, rather than spending problems, causes financial problems.
You may wish to produce more than one source of income if you’re keeping to a budget and not spending money on items you don’t need, yet still have trouble making ends meet. More money tends to bring more financial security.
5. Start saving.
“It is frequently simpler for the young working set to prepare for retirement than it is for their older peers.” – Scott Halliwell, certified financial planner
They frequently have fewer responsibilities, and any sacrifices made to save may only affect them, not a spouse or family.
Saving, like investing, is a passive way of building money, but it grows more slowly. Having money set up for emergencies might keep you out of financial difficulties and allow you to sleep easier at night.
Start putting money into interest-bearing savings accounts regularly to take control of your finances right now. This might be money set aside in your budget for savings.
Regardless of how little you save, over time, search for strategies to grow your savings. If you make it a habit to save money and regard it as a non-negotiable monthly cost, you’ll soon have more money saved up than simply emergency funds.
You’ll have money set up for retirement, vacations, and other expenses. Money saved in your 20s accumulates faster than money saved in your 40s and 50s by the time you retire.
6. Set financial goals.
Financial goals lead to a smart financial strategy.
Make sure your financial target motivates you.
- In five years, how do you want your life to be?
- Do you dream of owning a car or a home?
- Are there any children in the picture?
- What do you envision your retirement life to be like?
You begin with goals because they will motivate you to take the following steps and serve as a guiding light as you work to achieve your objectives.
Long-term financial objectives can assist you figure out what you’re working towards and what shorter objectives you’ll need to fulfill to get there. It’s critical to find out what you want out of life in your twenties, and how you’ll be able to utilize money as a tool to get there.
Your objectives may shift over time, but by establishing realistic goals and expectations for the future, you will be able to spend more carefully year after year.
Personal Finance in Your 20s: Opportunities for Growth
Making wise financial decisions in your twenties can pay off in the long run and help you achieve financial success in the future.
Follow the six steps above. You will be able to:
- live within your means
- strive for a healthy financial situation
- be debt-free
- and save money for the future and significant life milestones
It’s also critical to keep learning about money. It will help you keep money at the forefront of your mind, equipping you with the tools you need to make decisions that will keep you financially happy in the long run.