Managing Finances in Your 20s

Published on Author Ryan McManusLeave a comment

There is all sorts of advice out there on how to manage your finances, but it all boils down to a few basics. Whether you’re investing, refinancing your student loans, or paying down credit card debt, use these methods in order to make the most of your money and your time.

 

 

Create a Budget

One thing that can make saving easier is creating a budget. By creating a budget and sticking to it you get to see how much you’re saving and, more importantly, how much you’re spending (and on what, if you’re thorough!). That visualization helps many people to see the effects of their financial habits and can help facilitate informed changes to get you the most from your money. The most basic budget is just to make sure you’re spending less than you’re earning, saving 20% of your income and paying all your bills on time. For more on building a budget, take a look at the 50/30/20 method through our partners at NerdWallet.

 

Repay Your Debts

When dealing with debt, the idea is to be as diligent about paying the most that you can afford to pay, every month, for what will unavoidably feel like forever. The good news is with refinancing, you can get out of debt faster – and spend less money doing it. You can find your rate using our rate calculator to see how much you can save by refinancing.

 

Start Saving (and Investing) as Soon as Possible

The right time to start saving and investing isn’t when you’re earning the kind of money you’ve dreamed of earning – that time is now! Every moment your money spends out of an account that accrues interest is money lost. In your 20s and 30s, the big advantage you have for investing is time for your money to grow. Take whatever you can – experts suggest 20% of your income, but if that’s not feasible for you, try 5 – 10% – and put it in a savings account every month. Take that birthday money and start an IRA. If you have retirement options at work, take full advantage. The important thing is to start saving and preparing yourself for more financial mobility when you retire or for goals 10 – 15 years away such as buying a house.

 

Start and Maintain an Emergency Fund

On the road to financial stability, there are many twists and turns. An emergency fund helps to ensure that none of those twists and turns leave you in a ditch. Experts recommend that you start putting away whatever you can until you have three to six months’ living expenses saved.

 

If you follow this advice for managing your finances, you’ll be sure to always be ready for life’s surprises and you’ll be able to enjoy financial freedom sooner. With that freedom, you’ll be able to spend more time on the things that really matter.

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