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There are so many problems and financial challenges that come with being an adult. You need to know the to succeed in life.
Here are 43 financial tips for your 20s.
43 Financial Tips for Your 20s
Tip #1: Work First and Play Later
One of the most important things you can do while young is to set a long-term goal that will motivate and inspire you.
If your dream is to retire by age 45, then you should try setting up a realistic plan for how much money you'll need in retirement and start preparing now so that you're on track once the time comes.
You will hear from many others party it up in your 20s. I completely reject this.
Your 20s are the best time to invest 100% in yourself and take risks you simply cannot when you’re older.
If you work and succeed earlier, you’ll be able to spend your 30s and 40s on things you want to do, not have to do.
Tip #2: A House Is Not An Asset
It seems like everyone you know is buying a house. Simply because everyone else is doesn’t mean you should.
Houses are liabilities. They take money out of your pocket every month.
If you can rent out rooms in your house or buy a duplex or other multi-family property, your house can become an asset.
An asset puts money into your pocket every month.
Tip #3: Cut Back on Any Vices
Smoking, drinking, and eating out can quickly add up and eat into your budget. If you want to get your finances in order, it's time to start cutting back on any vices costing you money.
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There are many other ways to have fun without spending loads of cash.
Going on a walk, reading one of many financial books, and exercising are all low-cost, high-value activities.
Tip #4: Learn How to Cook
Eating out is expensive. And as a young adult, you are making enough money to eat out often, yet, should you?
There are many recipes that are inexpensive and quite healthy.
Spending $15 here and there adds up to thousands of dollars over an entire year.
How I Make $11,000 Per Year Renting Out My Spare Rooms?
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Tip #5: Revise Your Budget
Taking control of your financial priorities is a must. If you don’t create good financial habits, which will?
You don’t need to reinvent the wheel with a budget. Use my template for free here.
If you don’t have a budget set up, your bank account will suffer.
Tip #6: Go Back Through Credit and Debit Card Statements
Again, be organized, and this will help alleviate financial stress.
Tip #7: Get Rid of Cable
Better yet, cut out TV and give yourself several hours of your day back.
Tip #8: Be Wary of Cosigning Loans or Lending Money
The decisions you make in your 20s can either lead you to financial heaven or money hell. Giving someone (yes, even a family member) a loan may feel like the right thing to do at the moment.
The proverb goes: the fastest way to cut someone out of your life is to lend them money. You may never hear from them again.
Tip #9: Have an Emergency Fund
While it's important to be saving for retirement, you should also have an emergency fund that can keep you afloat in the event of a job loss or other financial crisis.
Set aside at least three months' worth of living expenses so that you don't need to resort to credit card debt.
Tip #10: Keep an Eye On Debt Levels
Going into debt to buy something you don’t need will lead to instant gratification yet hurt your mental health over time. Simply because you can afford it doesn’t mean you should buy it.
Tip #11: Avoid Stupid Debt
Simply put, only take on debt that is earning you a return. If a potential debt does not make a return, avoid it. I wrote about the differences between good debt vs. bad debt here.
Tip #12: Only Have One Credit Card, If Possible
Simplicity is key here. Unless you are churning credit cards and using the benefits to your advantage, one credit card, for now, is enough.
Tip #13: Pay Off High-Interest Debts First
Compound interest can really hurt when you have high-interest rates. Pay off the high-interest debt ASAP.
Recommended reading: Pay Off High-Interest Credit Card Debt: 15 Strategies
Tip #14: Check Your Credit Report Regularly
Your credit report is one of the most important documents for your finances, so you should check it regularly for errors and other issues.
You can get a free copy of your credit report from all three credit bureaus every year.
Tip #15: Look Into Repayment Options If You Still Have Student Loans
If you're still paying off student loans, it's a good idea to look into repayment options that will save you money. Some borrowers can reduce their interest rates by refinancing with a private lender.
Tip #16: Open an IRA Account If You Don't Have One Already
Retirement planning should start when you first graduate from college and enter the workforce full-time, but many young people fail to do so until later.
For most, it’s best to invest in an IRA.
Tip #17: Prepare Sooner Rather Than Later For Medical Expenses
It is better to have insurance and never need it than have an emergency and have no insurance.
Tip #18: Make Sure You're Using 30% Of Your Available Credit or Less
Your credit utilization rate is one of the most critical factors for your credit score, so you should make sure that you're using 30% or less of your available credit. Having your utilization below 30% will show lenders that you're responsible with money and can help improve your score over time.
Tip #19: Make Sure Your Credit Card Has A Good Rewards Program
If you're using a credit card, it's important to make sure that it has a good rewards program.
Here are a few cards I recommend for rewards:
Tip #20: If You Have A Lot of Debt, Consider Debt Consolidation
If you have a lot of debt, then you might want to consider a debt consolidation loan. This is the process of combining all your debts into one loan with a lower interest rate, making it easier to manage and reduce your monthly payments.
Tip #21: Go Cash-Only for a Month
If you're struggling to get your finances under control, then one way to do so is by going cash-only for a month. You’ll be forced to be more mindful about what you're spending and how much money you have available.
Tip #22: Live Below Your Means
One of the best ways to get your finances in order is by living below your means. Always spend less than you earn, so you can start building up a savings cushion for emergencies and other expenses.
Tip #23: Automate Your Savings
It's a good idea to automate your savings, especially if you find it difficult to save money on your own. This will allow you to direct a fixed percentage of your income into a savings account or investment portfolio without thinking about it.
Use technology to your advantage.
Tip #24: Negotiate As Many of Your Bills As Possible
One of the easiest ways to save money is by negotiating your bills with service providers. Negotiate your cable bill, cellphone plan, and even rent or mortgage payments.
Tip #25: Make Sure You Have Good Insurance
You should always make sure that you have good insurance.
Here are a few increased insurance options you can consider.
Have higher liability limits than the minimum. $100,000 per person, $300,000 per accident, and $50,000 for property damage is a good rule of thumb.
Even if you don’t have any dependents, term life insurance is a must-have. I bought a $500,000 policy in my early 20s that only costs about $25 per month. If I die earlier than expected, the money can go toward a cause I care about or send my nephews/nieces to college.
Tip #26: Cancel Any Unnecessary Subscriptions
If you're looking to save money, one of the best things you can do is cancel any unnecessary subscriptions. Cable TV, gym memberships, and the four different streaming services you have. Can you do with one?
Tip #27: Use Coupons
I like the service, Honey. I have it as an extension on my browser, and it automatically finds coupon codes for nearly all sites.
It’s free, helpful, and working in the background without any fuss.
Tip #28: Look For Cheap Ways to Have Fun
If you're looking to have fun but don't want to spend a lot of money, there are plenty of cheap ways. Go for walks in the park, play games with friends, or check out free events in your community.
Recommended reading: 50+ Frugal Things To Do When Bored
Tip #29: DIY When Possible
There are so many tutorials on how to do things yourself.
My most recent DIY project was converting the electrical plug from a hardwire to a 220 outlet on my new electrical cooktop.
I am amazed by how much information is on the internet.
Tip #30: Sell Any Unused Items You Have Around the House
My rule is simple. If I haven’t used it in the last six months it’s time for it to go. Recently I donated 60% of my clothing and shoes. Simplicity is my motto.
Tip #31: Shop Secondhand Whenever Possible
I buy so few new things. Laptop bags, watches, furniture, camera equipment, and books are examples.
Now, I did buy my Purple mattress new because a used mattress even I won’t buy.
Tip #32: Get a Roommate
If you're living by yourself, finding a roommate is an excellent way to save money on rent.
Consider renting out the spare bedroom in your house for some extra income every month.
Recommended reading: How I Make $11,100 Per Year Renting Out Rooms: 7 Step Guide
Tip #33: Don't Buy A House Just Because Everyone Else Is Doing It
There is a right time for (almost) everything. Don’t buy a house based on peer pressure. Make sure it’s the right time for you.
Tip #34: Never Stop Learning New Money Management Skills
You know about 5% of life and understand about 0.1%. Don’t be jaded, and always be willing to learn from those who have succeeded before you.
Tip #35: Automate Your Finances
Automating your finances is a great way to make sure that you're always sticking to your budget. You can set up automatic payments for bills, rent, groceries, and other regular expenses.
Tip #36: Work On Building Wealth Along With Your Savings Account
Compound interest can help you in your 20s. The earlier you start, the better.
Tip #37: Educate Yourself on Personal Finance and Investing
Find someone who has been successful and follow in their footsteps. Have your ears open and apply what you’re learning.
Related Content: Best Personal Finance Books for 20 Somethings
Tip #38: Avoid Bank Fees
Avoid bank fees at all costs.
Tip #39: Diversify Your Income Streams
Diversifying your income streams is a great way to protect yourself from potential financial shocks. The average millionaire has seven streams of income.
Tip #40: Negotiate Your Salary, Always
Another great way to make the most out of your money is by negotiating your salary. You can do this anytime you're first hired for a new job or during yearly performance reviews.
Tip #41: Try a Side Hustle
If you're looking for extra income, then it's a good idea to try a side hustle. This can include something like babysitting or tutoring, but if done correctly could really make a difference in your monthly income.
Related Content: 50 Best Side Hustles to Make More Money in 2022
Tip #42: Invest In Yourself
Improve your marketable skills and communication. Read books to help yourself. Spend time each day improving yourself.
No one will see this until there is a noticeable improvement. Keep at it every day.
Tip #43: Stay Away from Credit Card Debt
If you cannot afford it today, you should not buy it 99% of the time.
There are many financial tips to follow. Choose the ones that work fo you and have at it.
As a certified credit counselor and syndicated writer at MaxMyMoney, Max has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you'll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.