Financial Advice for People in their 20s

Twenty-something’s the world over are embarking upon an important time in their lives. During these years, most choose their careers, follow their dreams, and even start a family. They have their whole lives ahead of them. There is no better time to start planning for your future financially. Saving and investing in your 20s allows you to begin a wealth-building habit that will prove quite fruitful. It allows you to take advantage of the most important factor in saving and investing… time. Beginning the journey to financial security in your 20s can be daunting, but with discipline, persistence, and a bit of common sense, you will enter your 30s on a brighter path.

Get that Job

First and foremost, you must gain employment. Whether you are a college graduate or not, expect to start your career path on the low end of the pay scale. Experience is the key here. Money, however, remains important to your livelihood. College graduates may typically earn more than non-college graduates starting off, but they will also be tempted to spend more. Twenty-something’s should become accustomed to how much their take-home pay is and live accordingly.

Living within Your Means

Living accordingly translates to living a lifestyle you can afford. This can be accomplished by creating a sound budget and adhering to it. Your necessities, such as rent and food, should be taken care of before you consider endulging your wants. In addition to your basic needs, essentials, like car insurance, need to be considered. Use your budget. It’s not just for controlling your spending, but is also a guide to show areas where you can save money. And saving money plays a large role in preparing for a future of financial stability.

Set Some Aside

Saving should become a normal part of your life in your 20s. Setting money aside is not only for things you want, but also for things you may need when you least expect to need them. This is a good time to start building an emergency savings. You may fall ill, lose your car in an accident, or suffer some other major financial setback. It’s best to be prepared for such a situation. Set aside three to six months worth of salary just in case.

And Don’t Forget to Invest

Look into the retirement programs offered by your employer. Most employers have a 401(k) plan (403(b) plan for most non-profits) available to their employees. Your contribution is taken from your pre-tax income. Also, most employers will match your contribution up to a certain percent. This is like getting free money. Since you’re in your 20s, you can also take advantage of a very aggressive investment strategy. Stocks, historically, have shown a trend of growing almost 10% on an annual basis, so placing your funds here would give you the most potential for growth.

Give Credit its Due

If you were able to avoid the financial trap of a credit card as a college student, now is the time to get one. Building a solid credit history while in your 20s will enable you to reap the benefits of what it offers. You’ll need a credit history to apply for some apartments, to buy a house, or a car. Some jobs even use your credit history as a hiring tool. By developing good credit habits early on, you’ll be well on your way to establishing a reputation as a creditworthy individual.

Your 20s are an extremely valuable time of your life from a financial standpoint. It is during these years that you begin the foundation for your future of financial stability. Take this time to invest heavily in yourself, both personally and professionally. Establishing these habits of financial restraint and responsibility in your 20s, you begin a path that will take you through your 30s, 40s, and beyond.