Saving Money in Your 20s

Financial Tips for People in their 20s

Financial Tips for People in their 20s

Most people struggle to manage their finances when they are in their 20s. They have just entered the workforce, probably have a low paying job, have many bills and have little experience organising themselves.

People in their 20s also have many credit card companies throwing easy money at them. It’s not hard for someone just starting out in life to quickly get into a great deal of debt.

Here are some simple financial tips and mistakes to avoid while you are in your 20s!

Be Careful About College
College debt is out of control. There are hundreds of media reports about students leaving college mired in debt and being unable to find a job. This situation presents the worst possible start to adulthood.

To avoid the college trap, make sure you choose the right college and right major. Some majors see a massive return from the college investment, including maths and engineering. A liberal arts or education major will see a much lower return on the investment. Treat college for what it is – a financial investment in your future.

Don’t Abuse Credit Cards
Even though many companies will be throwing a great deal of money at you, it is crucial that you avoid getting into credit card debt.

It can severely impact your financial future, particularly if you struggle to pay the cards down. One of the fastest ways to damage your credit score is to have unpaid credit card bills.

Get Health Insurance
You might feel invincible in your 20s. Your body is strong, your mind is sharp, why would you need health insurance? Because accidents happen and unexpected illnesses are commonplace. If you are injured in an accident it could impact your future employability and put you into a lot of debt. Hospitals are obscenely expensive places.

Choose an Appropriate Lifestyle and Location
You should adapt your lifestyle and home to your finances. If you only earn $35’000 a year, don’t attempt to live in Manhattan. Be realistic about what you can afford to do for fun and where you can live. Don’t throw thousands of dollars at rent because it’s a cool house. That is dead money. You would be better off toughing it out a bit, saving your money and waiting until you can afford the lifestyle you want.

Save For Retirement and Build Savings
It’s never too early to start saving for retirement. Even if it’s only a small amount, it is essential to plan for your future. You should also build two types of savings accounts. One for emergency events, like a sudden illness or family emergency. The other should be for long term goals, like a mortgage deposit or buying a new car. Even if you can only squirrel away a few dollars given your current financial circumstances, you should always be saving. Save for things that matter and skip the meaningless or trivial consumer purchases.

Create a Budget
A well thought out budget can help you manage our finances. Don’t forget to try one of the online financial planning solutions to organise yourself. Most of them are free and can help you manage complex financial situations.

Be Careful Online
In the age of selfies and sex tapes, it is crucial to monitor your online presence. Doing something bad online could affect your future employability and financial security. It should be common sense, but don’t upload naked photos of yourself, don’t participate in racist rants on Facebook and don’t bully people online. All of these things can kill your future job applications in seconds.

Get Your Documentation Sorted
Now that you are a fully fledged adult, it’s time to get serious about your documentation. Keep track of everything from your social security number to birth certificate. Keep insurance documentation filed, keep your certificates together and make sure you know exactly where important financial documents are. Organization of these documents will help keep your financial life in order.

Aim to be Cashflow Positive
Do your best to always have more money in than going out.

In your 20s you need to manage a tight budget, establish your career and have fun. That’s quite the juggling act! Enjoy life but always try to improve your financial position. If you are having too much fun and digging a deep financial hole, your thirties will be filled with financial stress!

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