Smartest Money Moves You Should Make in Your 20s
Your 20s is all about making mistakes, learning from them, and setting yourself up for success. Living paycheck-to-paycheck is no fun, but that doesn’t mean it’ll always be that way.
It’s about doing the right things with the money you have now to ensure you can financially succeed in the future. So let’s examine some of the smartest money moves you should make in your 20s.
Pay Off Debt
We’ve all been there: spending too much money using our credit cards when we know that we don’t have enough to pay it back.
Try to pay your credit card debt back by using the snowball method. This refers to putting more money toward the smallest balance first and paying the minimum amount on the rest until you pay off the smallest balance. Then, tackle the next smallest balance, and so on. Try to stop using your credit card to ensure you’re not creating more debt.
But your debt isn’t just credit cards; it can include student loans, car payments, and much more. You can pay them off one at a time, as long as you have a budget.
Create a Budget
Many American schools don’t teach students about financial health, which leaves people to figure it out independently. That method usually includes spending way too much, regretting it later, and doing it over and over again until they finally learn the hard way.
Try to create a budget each month—how much can you spend on food, bills, and extracurricular activities? Once you sit down and calculate the numbers, you can set your budget goals—but remember to stick to them throughout the month.
Build Your Credit Score
Your credit score will determine many things in the future, like your ability to buy a new house or car, your loan interest rates, and more. If you have a low credit score, that’s OK—for now.
One of the most basic ways to increase your credit score is to keep a low balance on your credit cards and pay your bills on time every month. Being responsible with your payments can help you build a positive credit score over time.
Save for Retirement
The new retirement age is about 62, which is only 40 years away for some young adults. How much money do you plan on having by then? Hopefully, you don’t plan on still living paycheck-to-paycheck!
Consider investing in real estate in your 20s to make passive income and start putting the big bucks away for a more fun retirement.
Contribute as much as you can to your 401k and retirement savings to ensure you can live a comfortable life when you leave the workforce.
Establish an Emergency Fund
Unexpected expenses come up more often than we think, and preparing for them helps us avoid taking out a loan or increasing our credit card balances.
Experts recommend putting away at least three months’ worth of income for emergency funds, but try to save what you can reasonably afford.
Before you enter your 30s, be sure to follow the above smartest money moves to make in your 20s to prepare for the future and live a comfortable life.