20 Skills to Help You Manage Your Money in Your 20s

The money decisions you make in your 20s can affect your finances for years to come. That's why it's important to work on building healthy financial habits now so that you'll benefit later.

It may be easier than you think to build a sound foundation for your later years. Master these 20 money skills in your 20s, and you'll be thanking yourself in your 30s, 40s, 50s, and beyond.

Learn How to Create Your Budget

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Your first step is to take a look at your income and create a budget. A budget will help you decide when and how to spend your money. It gives you the power to decide where your money goes. It also gives you permission to relax, since you know your priorities are accounted for.

Start by creating and following a budget now to help you manage your money without stress.

It’s OK to splurge sometimes, as long as you have a plan and you can afford it.

Try starting with something simple, such as the 80-20 budget or the 50-30-20 budget. These simple guidelines make sure that you are properly accounting for both saving and spending.

Have Regular Budget Meetings With Yourself

Each night, take five minutes to go over your budget and see whether you've stayed in line with your spending. Doing this regularly will give you a clear picture of how you are doing for the month.

A daily review may seem like a lot, but this schedule keeps the check-ins brief, since you only have to review one day's worth of transactions.

You should complete this budget check-in even if you are married. With both partners monitoring the accounts frequently, you won't be caught off-guard by large purchases or bills. Plus, it will set you both up for quick and effective budget meetings as a couple. Budgeting as a pair will keep you both on track and working toward your mutual goals.

Balance Your Accounts Each Month

It may seem like a lot of work for very little payoff, but balancing your accounts is a necessity. It can keep you from overdrawing your account and paying unnecessary late fees over overdraft fees. It can also help you to catch identify theft or see if someone has stolen your account information. 

Balancing your checking account is not too difficult; begin by gathering your most recent banking statement, a calculator, and a worksheet if you need help with the calculations. Then compare your transactions to the bank's list and spot any differences.

If you find an error, contact your bank right away. They will work with you in the event of unauthorized transactions, but you may still be responsible for some or all of the loss, depending on the circumstances.

Set Financial Goals

Knowing why you're taking these steps is essential to your success and will help you keep going. You should set long-term, mid-term, and short-term financial goals. For example, a long-term goal might be saving for retirement. A mid-term goal might be saving up for a wedding or a down payment on a house. A short-term goal could be building up your emergency fund.

A key to achieving these goals is to assign them specific dollar amounts. Don't just say you want to save "a lot" or "enough." Say "$20,000," or whatever is right for your situation. Specific, actionable goals are much more likely to net results.

Plan for Your Financial Future

Take the time to visualize and plan for your financial future. This plan should take you through all of your major financial milestones, from buying a home to paying for your kids' college if you decide to have kids.

It can feel overwhelming to sit down and plan it out all at once, but doing so can help you prioritize your goals and know when and how to spend your time.

If you need a little extra help with this task, consider meeting with a financial advisor. They can help you figure out the financial side effects of your major life decisions.

Start Contributing to Your Retirement Account

You've probably heard this before, and that's because it's pretty sound advice: You should start contributing to a 401(k) or other retirement plan starting with your first job.

Contributing early gives you time to let compound interest work in your favor and you'll have less catching up to do later.

If your company doesn't offer a 401(k) or you're self-employed, there are other retirement accounts you can consider.

A good goal to work toward is to earmark 15% of your income to saving for retirement. If you can't contribute this much right away, it's OK; work up to it as you increase your income and pay off debt. 

Get Good at Finding Deals

There are a lot of ways you can save money on things you normally buy, such as clothing or groceries. This may mean learning the best time of year to buy linens or find a deal on a new car.

You can find ways to save on everything from your groceries to your furniture. If you make looking for a deal a habit, you will be able to save significantly over the course of your life. 

Learn How to Avoid Impulse Shopping

A smart shopper is a bit different from a deal hunter. Once you have perfected the art of finding a good deal, you need to become a smart shopper and determine whether you need the item at all before you buy it.

That does not mean you should not buy things you want. It means you have the ability to classify wants as such, and to make sure that you have the money available to cover a purchase without dipping into savings. A good idea is to wait at least 24 hours before making a major purchase. 

Shop With a List and Plan Before You Buy

One of the easiest ways you can save money while shopping is to shop with a list and stick to it. This is a simple habit to start and only takes a few minutes before each trip.

Having a clear list in front of you can help you rein in your impulse spending, which can save you time and money. Plus, having a list can help eliminate the need to take a second trip to the store because you forgot something, which saves you money on gas and additional impulse purchases. Take the time to make a list before each of your shopping trips and the savings will start adding up.  

Account for Irregular Expenses

Irregular expenses may be things such as holiday shopping, vacation spending, taxes, or home repairs.

If you know that certain expenses come once a year, set aside some money each month to cover them. By the time they come around again, you'll have saved enough to pay for these major expenses without having to dip into your savings or use a credit card. 

Taking the time to identify these costs and plan for them will help you build more net worth on your way to a solid financial future. 

Save Up an Emergency Fund

One of the financial worst habits you can develop is to rely on credit cards to cover daily expenses when you go over budget.

Instead, it's important to have a good emergency fund in place so you don't need to use credit. Aim to save up three to six months' worth of expenses. That will cover you in the event you lose your job or need to make a major, unexpected purchase or payment.

Focus on Networking and Career Growth

Part of your financial picture is making sure to earn an adequate income. Concentrating on job performance and career growth will help. That's why it's important to keep your resume updated so that when you hear of a good job opportunity, you can take it.

It is also important to continue to build your professional network, even if you like your job. A strong professional network will make it much easier to find a new job when you are ready, or may even present you with a great professional opportunity when you're not looking.

Take Advantage of Your Employee Benefits

Remember to take advantage of your employee benefits. They are part of your compensation package and they can offer tax benefits, too.

For example, health insurance or health savings accounts may be paid with pre-tax dollars.

When it comes to retirement savings, be sure to take the employer matching contribution, if one is offered. It's basically free money for your retirement.

Other employee benefits such as stock options or different insurance plans can also help you financially, depending on your situation.

Pay Yourself First

When you have money coming in, don't forget to pay yourself first. That means making savings a priority—not something you tackle when everything else is taken care of.

You can have your savings automatically withdrawn from your checking account and put into your savings account via automatic transfer. This makes saving easy and automatic. Just make sure to keep enough in checking to pay your bills.

Set a goal to save 10% to 20% of your income each month to put toward your long-term priorities.

Track Your Progress

Part of setting and achieving your financial goals is tracking your progress.

If you've set aside some money for your dream vacation, a down payment on a home, or your child’s college fund, take a moment to see how far you've come. Compare that to where you want to be. Remember to celebrate your wins and your hard work.

Keep track of how much you've saved toward each of your goals as a reminder of your abilities and dedication. Even if those amounts are small, they'll start adding up.

Protect Your Savings

If you find it too easy to dip into your savings account when you find yourself running short on cash, it's time to take action.

Your emergency fund should be liquid and easily accessible so that you can cover unexpected expenses right away, but you can move the rest of your savings to accounts that are more difficult to access.

For instance, putting your money in an online bank can add a few extra days to the time it takes to transfer your money, which may give you the cooling-off period you need before you make an impulse purchase. CDs are another option if you can find any with competitive interest rates—they'll impose a penalty if you try to withdraw before the time period is up.

Lean on Your Support Network

It helps to have friends that can support your financial choices. Although you probably won't spend a lot of time talking about your bank accounts, it's still good to have friends who understand what you're trying to do.

Some friends may encourage you to spend money while others are more supportive of your goals. Building a good financial support system can help you reach those goals more effectively. 

Check Your Credit Report Regularly

While you are focusing on building these skills, don't forget to check your credit reports regularly and be on the alert for identity theft. You can request one free credit report from each credit bureau per year. Space them four months apart to cover yourself for a full year. Doing this can help you catch identity theft much more quickly and protect your credit score, too.

Make Giving Back a Habit

Part of making sure you have enough is remembering those who don't. Be sure to remember to give back to your community in some way. You can do this by making donations or contributions to the causes and charities you support, or by offering your time and talents instead. Regularly giving back will remind you to have gratitude for all that you have.

Find Your Balance

Finally, it is important to find the right balance between working, saving, and enjoying your life. Take time to relax regularly. It's even OK to treat yourself—just make sure that you are saving enough of your income to be comfortable and properly plan ahead.

This is a difficult skill to develop, but essential if you want to be financially successful. It's OK to make mistakes. Just learn from them and keep going.