9 Money Moves You Need to Make in Your 20s

beautiful-1274361_1920Managing money as a millennial can be a tough task. Sometimes it may feel like you’re starting from the ground up and there’s so much to learn. If anything, here are 9 financial moves to make in your 20s to stay on track with your finances and enjoy the years to come.

1. Pay Off Debt

Paying off debt is one of the hardest things to do. Many American families are saddled with debt, and let me tell you, the longer you have it the harder it is to get rid of it. Most 20-somethings are burdened with student loan debt.

No matter how much debt you have, devise a plan to start paying it off and getting rid of it. No one wants to be stuck paying off debt in their 30s especially if you want to do other things with your money like get married, start a family, or a make another large purchase. Debt can hold you back and life’s too short so start putting extra money on your debt now before your situation gets too complex and you gain more responsibility.

2. Save Up a Large Emergency Fund

This is another priority you want to tackle in your 20s. Having an emergency fund is a must because it’s your first defense to unexpected expenses like car repairs, medical bills, etc. and you don’t want those expenses to translate into debt you can’t pay them.

I come across a lot of millennials who are spenders, but I also meet many who have other goals for their finances that involve enjoying experiences. Some people want to travel and that costs money. Other people get fed up with their jobs after a few years and want to quit and that requires money too if you don’t have a solid plan.

Saving up 15%+ of your income can allow you more freedom and control over your financial situation. It’s ideal to have 3-6+ months of expenses in your emergency fund so you can be able to cover the unexpected with ease.

3. Spend Less Than You Make

In order to pay off debt and save, you’ll need to start spending less than you make. The best way to do this is by tracking your spending and create a budget. If you spend mostly with debit and credit cards, you can track your spending with free apps like Mint and Personal Capital. You can also manually enter in cash transactions so you can get full picture of your spending habits.

Sticking to a realistic budget and making it a priority to save and pay off debt will allow you to live below your means. Plus, it’s easier to be frugal when you are in your 20s. If you can have roommates (this is important if you’re renting in a pricey city like Chicago), live with your parents for a few more years, drive an older car, learn how to cook at home, ditch cable, etc. you can lower a ton of expenses so your budget won’t be as tight.

This is a good habit to establish because you’ll need it as you get older.

4. Use Credit Cards Wisely

Credit card debt is the absolute worst in my opinion because it’s hard to control and the interest rates can be very high. This is why everyone should use credit cards wisely and avoid getting into debt at all costs.

If you have credit cards, start viewing them as a tool used to build your credit and keep your spending/utilization lower than 30% of your credit card limit.

Always pay your balance off in full each month to avoid paying interest. That is probably the most important piece of advice because if you carry a balance, you’ll have debt and it can easily grow.

Using credit cards wisely can help increase your credit score and give you a solid credit profile. If you do the hard work in your 20s, you can reap the benefits later.

5. Contribute to Retirement

Contributing to retirement when you’re young is so important. No one wants to be working forever, and worse, no one wants to be forced to work forever because they can’t afford to retire.

Social security benefits will most likely dwindle at most when millennials reach retirement age. That means there’s not much to count on other than ourselves. I don’t care how young you are, if your employer offers a 401(k) program, utilize it. If they are offering to match your contributions, try to contribute more.

If your employer doesn’t offer any retirement benefits, open a Roth IRA which is an individual retirement account. The earlier you start, the better it will be because your contributions will compound over time and increase.

6. Find Ways to Save on Education

If you are going to college or going back to school, find ways to save on the costs of college so you can minimize the amount of student loans you take out.

Take advantage of scholarships and financial aid if you can, you can also work or side hustle part-time and save up for college expenses even though this option may take longer.

If you are interested in graduate school, see if you can work at the school or become a graduate student in order to receive a tuition waiver. There are so many ways to get around the high costs of college and you just need to dig deep and be flexible.

7. Obtain the Proper Insurance

Make sure you have all the right insurance in case anything unexpected were to happen. This includes auto, homeowners/renters, and health insurance at the very least. If you are going off your parent’s insurance soon, make sure you sit down and compare your options in the marketplace and see if your employer offers any coverage.

Also, if you have a child, you might want to consider life insurance as well.

8. Stop Relying on Your Parents

We all do it and there’s nothing wrong with it to a certain degree. I used to borrow money from my mom in college and even asked her to pay my rent once or twice when I couldn’t afford it because I wasn’t making much. At the time I was a struggling college student. I have since then turned my financial situation completely around and become more independent.

Your parents are okay to lean on when you are in need and they want to help you out. However, no one wants to be borrowing money from their parents and depending on them in their 30s. If make many of these other financial moves mentioned, you’ll work toward financial independence from your parents before you turn 30.

9. Don’t Forget to Have Frugal Fun

With all of this talk about managing your money properly, budgeting, and preparing for the future, we can’t forget about having fun and enjoying the present. Your 20s will be a fun time and you want to make the best of it and learn and experience as much as you can.

Just make sure you budget for fun and take advantage of frugal fun. I go out with friends some weekends, take mini trips, and go to a ton of festivals and events year-round but I don’t spend a ton of money doing it. That’s because I’m always up to try something different, use coupons, and take advantages of deals. When I don’t have much money for entertainment because I’m focused on other priorities, I still find free or cheap things to do.

If you have a good group of friends, you can have fun no matter what you do together.

How many of these financial moves have you made yet? Would you add anything to this list?

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