Managing your money in your 20s can lead to a life of financial control and wealth. A lot of times, young adults, don’t follow the advice or think long-term about their money.
The sooner you can follow this need-to-know advice for young adults, the better off you will be in the long run.
I decided to ask the leading finance experts what their best advice for managing your money in your 20s and building wealth.
This is what they said.
Top Tips for Managing Your Money In Your 20’s:
Managing your money in your 20s doesn’t have to be difficult. It takes having a plan the where-with-all to stick to it without getting distracted.
It’s hard to avoid lifestyle creep and to know what to do with real grown up income.
These simple managing your money in your 20s tips will help you live a life you want without the stress of learning things the hard way.
Tip #1 Managing Your Money In Your 20’s From Jonathan “Mr. Centsible”
Jonathan aka Mr. Centsible says:
Take the opportunity in your 20’s to live like you’re poor, even if you’re not. Live with roommates, drive a beater car, continue eating ramen for dinner.
No one EXPECTS you to have your life together in you’re early 20’s so you can get away with this. Aka avoid lifestyle inflation as much as possible.
Later on in life when you have a significant other or family, it’ll be much harder to live that life. I lived with roommates until I was 31. I actually paid less in rent sometimes than what I had paid for rent in college. It’s not glamorous, but it allowed me to save a lot of my money and afforded me to eventually buy my own house.
Tip #2 From Logan Allec, Money Done Right
Logan Allec, CPA and Owner of Money Done Right says:
It’s OK if you don’t have your financial act figured out 100% by the time you turn 30. Some people haven’t even started their careers by the time they turn 30, so don’t sweat it!
One financial goal that everyone should reach before they hit the big 3-0, however, is to at least start automating good financial habits, regardless of how much or little they have.
This means having your paycheck perhaps split between at least a savings account and a checking account and making sure that all bills are paid automatically out of your checking account. You should also be automatically contributing a little bit to your retirement funds — even if it’s only $25 per month.
Remember, if you automate it, you won’t miss it, and you will be pleasantly surprised when you check your balance every now and then and see how much you’ve been able to stash away!
Not only will automating these good habits help you avoid things like late fees and overdraft fees, it will also set you up for bigger and better things as your earnings power increases in your 30s — things like paying off your student loans, maxing out your retirement accounts, and maybe even starting your own business.
Remember, it’s a lot easier to automate investing $250 or $2,500 a month in your 30s when you’re making six figures if you got into the habit of stashing away $25 a month in your 20s when you’re making less than that.
Good habits are everything when it comes to a succesful financial life, so start now, even if you feel like you don’t have a lot! I, for one, wish I had started automated my finances earlier on in my 20s — I’m certain I would be a richer man today!
Tip #3 From R.J. Weiss, CFP®
R.J. Weiss, CFP® and founder of the The Ways to Wealth says:
The most important thing you can do with your finances in your 30s is get in the habit of paying yourself first. Whether that’s paying off your debt, building an emergency fund, or starting to invest.
Whatever is most important to you, make sure that money is allocated upfront.
Tip #4 From Dafina of Dollar Plus Sense
Dafina, founder of Dollars Plus Sense says:
Don’t let your cost of living increase as your salary increases. When I finally started to make a good salary in my 20’s, I would blow most of my money on fancy cars and luxury items. If I could do it all over again, I would’ve kept my cost of living as low as possible.
Also, start investing NOW! Time is on your side when you’re young; and with the power of compounding, you can build real wealth. Increase your financial literacy so you know what you’re doing, and pay attention to the fees associated with investing.
If I took this advice, I would’ve been financially free MUCH sooner.
Tip #5 From Raj Chavda of Parenting Financial Independence
Raj Chavda, owner of Parenting Financial Independence says:
In the spirit of paying yourself first, I always consider retirement and investing accounts as a tax on myself. Meaning I consider it to be gone and I can’t spend it.
This forces me to live off the remaining and put investing a priority over things that don’t serve my future self. This way I don’t miss that money even though it is still in my control.
Tip #6 From Jonathan of Joney Talks
Jonathan- Joney Talks! says:
If I had a Delorean and jump back in time to my 20s, these are the things I would do and I recommend you to do : Automate your finances, tell my money where to go as soon as you get paid, save every month even small amounts and build an investing pot (even if you do not know what to invest in yet).
This will put you lightyears ahead of anyone starting in their 30s. The important is to develop the habit of putting money away. Be weird in your financial choices and do not follow what everyone else around you is doing, Don´t get “pressured” to buy a home because everyone else around you buys a home, do not get caught in the hype of picking and trading the right stocks (go for low-cost index funds instead), see what works for you and what will get you closer to your financial goals :
Travel the world, buy a home for your family, have a meaningful and flexible career with financial peace,…Read Personal Finance books, blogs,watch Youtube videos, listen to Podcasts… There are plenty of sources to choose from and help you build your financial plan.
Tip #7 From Amanda of Frugal Confessions
Amanda from Frugal Confessions says:
Get your student loans paid off. A too-large percentage of people are now going into retirement with student loans.
I know your 30s may sound young compared with that, but having money going towards your student loans in your 30s is going to hold back your life plans. You’re going into a season of life that likely is going to cost more, whether you mean to by starting or growing a family/buying a home, or whether it “just happens” with lifestyle inflation.
Get those loans paid off in your 20s so that you don’t have them holding you back.
How to Build Wealth in Your 20s:
Building long-term wealth is easier the young you start.
These tips will help you build wealth and plan for your future.
Investing now can make a bigger impact than if you try to do it when you are older. Even if you can only afford small amounts here and there, it’s important to start now.
Tip #8 From Mike at Ninja Budgeter
Mike at Ninja Budgeter says:
When I was in my 20s, I was making good money, and wasted nearly all of it. I didn’t realize how much more difficult my financial life would become once I added in a mortgage, kids etc. My advice is this: start living on 80% of your income now.
Take the rest and invest it regularly, until you’re accustomed to your new income level. Saving money is a habit that gets harder and harder to start as you age. Trust me, in ten years, you will be very thankful that you started now.
Tip #9 From Allison at Fabric
Allison Kade, Millennial Money Expert at Fabric says:
When it comes to investing, I like to tell people to just get started. I’ve spoken to many readers who don’t invest because they don’t know precisely which mutual funds are the very, very best, or they’ve heard rumors that the market might crash again soon.
So, they’re waiting for that to happen first. Studies have shown that, over a long period of time (i.e. from your 20s till you’re ready to retire), the most important factor in investing success is asset allocation and time horizon.
In other words, having the right mix of stocks, bonds and other investments for your situation, and simply staying in the market over a long period of time. At the end of the day, for the most part, choosing a pretty-good-but-not-the-world’s-best investment is far better than waiting to choose the ultra absolute best and not investing at all.
Tip #10 From Sandy Yong, The Money Master
Sandy Yong, author of The Money Master says:
I wish I knew to ask the financial advisor at my bank about the fees associated with purchasing mutual funds. If I had known in my early 20s that my actively managed mutual funds were costing me upwards of 3%, I would have moved them into index funds or ETFs sooner rather than later.
I also wish that I used some of my money to buy a condo in my mid 20s as an investment property. Considering that the real estate market has boomed in the past decade, I would have benefited from the increase in property value.
Managing Your Money In Your 20s Tip #11 From Dan Hinz, AdultingWithMoney.com
Dan Hinz, Financial Coach at AdultingwithMoney.com says:
Understand how compounding interest works and play around with a retirement calculator. Knowing how much you need to put away to retire will open your eyes to what adulting is all about!
Tip #12 From Kevin Geary of DigitalAmbition.co
Kevin Geary, Online Business Coach & Founder of DigitalAmbition.co says:
My biggest tip is to calculate exactly what your time needs to be worth in order to hit real wealth-building goals.
When I was in my 20s I compared what I made hourly to other people instead of figuring out what I needed to be worth in order to get where I wanted to go.
When I learned how to truly calculate the value of my time and the actual monthly financial target I needed to hit to build real wealth (you can use this calculator I built to calculate your numbers), I realized I wasted a decade playing way too small.
Learn what your time needs to be worth and act accordingly!
Tip #13 From Allan Liwanag, The Practical Saver
Allan Liwanag with The Practical Saver says”
Know your limits and live within your boundaries. When you are young or under 30, there are so many things you want in life. You may want to buy a car, a house, gadgets, among others.
The truth is money can be limited at this age or that there are more pressing responsibilities you need to take care of. The best thing you can do is to know your financial limitations and live within that boundary.
This way, you are not making financial decisions that can negatively impact you now and all the way into the future.
Tip #14 From Anna Bee, The Land of Milk and Money
Anna Bee, Founder of The Land of Milk and Money says:
Do everything you can to avoid going into credit card debt in your 20s. The average credit card balance for those who are 35 years old and under is around $6,000, but this can quickly spiral out of control as high interest rates and fees for not making minimum repayments start to make that number rapidly climb.
By avoiding using a credit card (unless you’re absolutely sure you can pay off the balance each month), you’ll be miles ahead of others your age when you turn 30 years old. And by using the money you’d otherwise be spending on credit card interest to, say, invest for retirement, you’ll be sprinting towards a secure financial future while most others aren’t even at the starting line!
Tip #15 From Kathleen at Radius Bank
Kathleen at Radius Bank says:
Automate your savings into a high-yield savings account to help you grow your money faster.
Take it one step further and “hide” this savings account from yourself by opening an account at a different bank, making it so you really have to think about transferring this money to your checking account, helping you eliminate the ability to spend it on something frivolous.
The Best Financial Advice for Young Adults:
Here are some of the best tips for young adults and managing your money well.
This financial advice will help you avoid these same mistakes so you can get ahead faster in life.
Tip #17 From Tina Antrim, Antrim Financial Coaching
Tina Antrim, Antrim Financial Coaching says:
Think before you spend. Too often we get caught up in wanting something immediately or because we want to meet some kind of expectation or because it will make us look good. I wish I had thought about future purchases.
For example, you can spend money on an expensive wedding or save up to buy a house. Most people cannot do both without getting into debt. And going into a bunch of debt is not the way you want to start your young adult life, especially if you already have student loan debt.
Plan for your purchases and think before you spend that precious treasure!
Tip #18 From Riley Adams, CPA
Riley Adams, CPA says:
Learn to live well within your means as early as possible. My parents were expecting my older brother and my father’s company laid him off a month before the birth. Fortunately, they had saved enough to live on savings and their emergency fund until he could find a job over a year later. From this point forward, my parents established cash reserves and a conservative carveout of their portfolio in the event this could happen again in the future.
My parents made it a point to instill this lesson in my brother and I when it comes to financial planning. My wife and I take it to heart and have roughly 2 years of reserves available to us in the unfortunate event of a layoff, life emergency, or unexpected incident.
Tip #19 From Jeff Rose, CFP
Jeff Rose, CFP® says:
Make your first $100 online. Starting an online business was, by far, the best decision on my career but many get stuck because there are so many options – blogging, vloggging, Amazon FBA, Etsy – they get stuck because of paralysis by analysis.
Don’t get stuck because of that. Choose one option and stick it out until you score your first $100. That momentum is huge and can open the door to so many other options,
Tip #20 From Roxanne at For Another Time
Roxanne at For Another Time says:
Plan for a future that isn’t what you expect/plan. By that, I mean starting to consider things like owning a home, having kids, etc, before you get there (if you know that’s in your future).
We knew we wanted one of us to stay home with kids, but then we bought a house based off what we could afford with both incomes. To say that it has made a one-income household feel like a VERY tight is the truth!
If we could go back in time, we would have paid much more down at the start, and bought a cheaper house (and o I f that weren’t enough, despite having 401K accounts we had never otherwise prioritized savings.
Tip #21 From Ty Stewart, Simple Life Insure
Ty Stewart at Simple Life Insure says:
If I could go back in time, knowing what I know now, I would seriously consider purchasing more life insurance at a younger age. It is so inexpensive when you are young and healthy.
A healthy 25-year-old can purchase a 500K policy that runs for 20 years for less than 20 bucks a month. What many people don’t realize is this also usually gives you the option to extend or convert the policy later in life WITHOUT being subject to any new medical underwriting.
I’ve seen too many people that are not eligible for coverage later in life due to health issues or end up having to pay exorbitant premiums. If you can just find $20 a month now, you’ll have the peace of mind that your loved ones will be protected down the road.
Tip #22 From Jerry at Peerless Money Mentor
Jerry at Peerless Money Mentor says:
In my 20’s, I made so many financial mistakes that I now regret at 32. One of them was thinking that, since I was young and invincible, I would not have any health problems. I scoffed at the idea of health insurance. This was a huge mistake.
When I ended up having a medical issue, I had to take on credit card debt to pay for it. Learn from me and start planning for this unknown variable by contributing to an HSA or enrolling in your employer’s health plan. Do it now. Your future self will thank you later!
Managing Your Money In Your 20s Tip #23 From Caniella at LikeToDabble.com
Daniella at liketodabble.com says in regards to managing your money in your 20s:
Don’t buy a home right away. Rent first and maybe travel around before sticking yourself to a place. Start saving and put money in low index funds, Roth IRA and high yield savings accounts to start building wealth as soon as possible. Learn multiple skills and never stop learning
Managing Your Money In Your 20’s Summary
Managing money in your 20s is so important for lifelong success. It’s the perfect time to establish good habits and start investing.
You can easily become a millionaire in your lifetime by investing small amounts in your 20s compared to trying to catch up later.
By managing your money in your 20s, you will learn to avoid lifestyle creep while investing while your income increases and you will quickly be way ahead of your peers.