How to Manage Your Money in Your 20s

Your 20s are an exciting time, full of discovery, adventure and the ability to take risks that you might not be able to take in the future. But one risk you don’t want to take is with your finances. Learning how to manage money in your 20s can help set you up for a bright future. 

Financial planning in your 20s isn’t just a good idea — it’s an investment in your future. So, whether you’re looking for financial tips for young adults, or wondering how to set financial goals for your 20s, here are some tips that you can follow to put yourself on stable footing.

1. Stick to a Monthly Budget

It’s the first lesson in managing your money, no matter your age: set up a budget and then stick to it. If you don’t have a budget, now is the time to create one. Having a budget in your 20s will help you manage your money and plan carefully, curbing spending and saving money when you’re young. By creating and sticking to a budget, you’ll help ensure that you can cover all the necessities — and make room for some extras. Learn how to create a personal budget and track your spending every month.

2. Choose Insurance That Will Protect You in an Emergency

Plenty of things can go wrong — you might experience a medical emergency, lose your job or experience other kinds of loss. There’s no surefire way to avoid uncertainty, but when you’re thinking about financial planning in your 20s, remember that insurance policies can protect you and your bank account when things go wrong. There are many kinds of insurance to consider getting in your 20s, including home, auto and even life insurance. Policies like these can help provide protection from liability, damages and financial loss. Protecting yourself, your family and your assets against loss is one of the most important reasons for having the right kind and amount of coverage.

3. Maintain a Healthy Credit Score

Your credit score tells financial institutions whether to lend you money. That means when you’re planning your personal financial strategy, you want to pay attention to your credit score. Your credit history can determine what kind of loans you qualify for, as well as the interest rate you’ll pay on them. It can even play a part in getting approved to rent an apartment. Building a solid credit history can have a big impact on your future financial well-being and set you up for money management success down the road.

Choose your credit cards wisely, especially when you’re selecting your first credit card. Check the terms and conditions of the card, keep an eye out for annual fees and be aware of the interest rate. Make sure you know how much you’ll be charged if you pay late or exceed the credit card limit. 

And remember to be mindful of your budget since it’s much easier to overspend when you are using credit cards. You might consider strategies like setting a monthly spending limit, only spending cash for set periods of time or discussing potential big-ticket purchases with an accountability partner, like a family member or friend, before putting them on your credit card.

4. Have a Financial Backup Plan

Developing a financial safety net is a crucial part of any money management plan, whether or not you have family members that you could lean on if needed. Without a plan for emergencies, you could find yourself one unfortunate event away from financial disaster. A solid savings strategy for young adults might include a savings account with several months’ worth of living expenses, adequate insurance and a secondary or alternate source of income. If you suddenly face an emergency, such as your home needing repairs, a layoff or a loved one becoming sick suddenly, building an emergency fund is critical for your peace of mind.

5. Start Saving for Tomorrow Today

The sooner you begin saving, the more time your money has to grow. Finding ways to invest in your 20s, save money and earn interest now will help you get on track toward managing your money in the long term. With compound interest, a few dollars today could turn into big money over the course of a lifetime. Make a plan to start saving for future needs, from your kids’ higher education to your own retirement. Retirement account options include a 401(k) plan through your employer, a traditional or Roth IRA, mutual funds and annuities. Though retirement might seem a long time away in your 20s, it’s never too early to start saving for retirement. Even a little money per month now will go a long way in the future.

6. Map Out Your Financial Goals

Don’t just dream about being better at money management. Put an actionable plan in place. Financial goals require regular consideration and effort over a long period of time. Having a workable financial strategy can help you make your goals a reality.

For instance, do you want to repay your student loans? You could pay off your student loans steadily and incrementally or try to fast-track your repayment timetable through tactics such as making additional payments, refinancing your loan and applying for loan forgiveness. And be sure to check the student loan regulations to see if you qualify for programs such as Public Service Loan Forgiveness (PSLF), which can forgive your remaining loan balance after ten years of working in qualified non-profits.

We Can Help You Manage Your Money

Take the next step in preparing for your financial future by contacting a Farm Bureau agent or advisor today. An agent can help you find the right insurance coverage that will protect your bank account when the unexpected happens.