Financial Advice for People in their 20s

Young adults, in their early twenties will face a lot of financial changes during this decade of their lives. Most individuals will graduate from college and start a career of their own. As a result of this, individuals will be establishing an identity of their own in many ways. No longer will they have the protection and support of their parents, they will have to do it themselves. Young adults may find themselves getting married and starting a family of their own, buying a first house and even beginning to plan for their retirement. These are some very important tips that young adults should follow so that they their future will be financially secure.

Plan ahead

This is the single most important thing that a young person can do to establish their financial stability today and in the years to come. First, decide what your financial goals are in the short-term, medium-term and long-term. A short-term goal could be saving a percentage of each paycheck to purchase a large ticket item that you would like to own. In order to meet this short-term goal, save a little bit of money from each paycheck so that you can meet that goal. A medium-term goal might be to own a home of your own. This will take longer to achieve than the short term goals, but by saving now, that goal will be achieved much sooner than it would have without forward planning. A long-term goal is probably to be able to retire and enjoy the later years of your life. In order to start the path toward achieving this goal, participate in your employer’s retirement plan if they offer one. Many employers will match a portion of your contributions, effectively giving you a raise for your future.


The main thought when living in a budget is that if you cannot afford to purchase something, then you should not buy it. This sounds like something very simple, but most people struggle with staying within their budget. In order to write a workable budget, write down all of your expenses and all of your income. There could be either a surplus or a deficit in your budget. The goal is to make that balanced. So, if you see that you are spending too much money on clothing in a month, then cut back the amount of money that you are spending in that area and redistribute that to other areas that aren’t allowed enough spending so that the budget will be balanced. Sometimes you may end up spending less than you have budgeted for in a month and in those situations it is okay to reward yourself with a little something extra.

Establish Credit

Most people in their twenties are working toward establishing their own credit for the first time in their lives. Having good credit is important so that you can qualify for decent interest rates when purchasing a car or a first home. The best way to start establishing credit is to get a secured credit card. With secured credit cards, you will make a deposit of around $500 dollars into a savings account that the credit card company will hold as collateral on the purchases that you make. After a year of making your payments on time, your money will typically be refunded to you and the credit card will transition to a traditional credit card. Plan to use your credit cards sparingly and pay them off every month when you get your credit card statement. Not only will this save you money on interest rates that you will qualify for when making large purchases, it could also save you money on car insurance and even security deposits on utilities as these types of companies view good credit as less risk for them.

Start investing for retirement

At this point in your life, this doesn’t sound like it would be very much fun, but the money that you invest now will be worth many times what it is worth now, meaning that you will be able to retire earlier and enjoy more of your life. The best way to do this is to invest in the retirement program at your place of employment as they will often match a portion of your contributions. Another way to wisely invest in your future is to invest in a Roth IRA. Roth IRAs are funded with after-tax dollars, meaning that the money that is contributed will continue to grow tax free throughout your working lifetime.

Have a little fun

All of the steps to establish financial stability don’t sound like they would be a lot of fun. However, it is important to have a little bit of fun in your life. You can do this by finding free or cheap entertainment close to where you live, such as outdoor activities or cheap performances by local groups. You can also work a small entertainment budget into your overall budget so that you will be able to enjoy yourself. If you don’t use this money on a monthly basis, you will be able to save for a vacation or for more expensive entertainment venues.

Following these guidelines while you are young will ensure that your life will be financially stable both now and in the future. At first it might look like a huge undertaking, but after living these rules for just a few months in your life, they will become second nature. By saving more and spending less now, you will be able to have a future that is unlike that which most people have the opportunity to experience.