5 Financial Habits to Establish in Your 20s

Woman looking at her tablet

JGI/Jamie Grill/Getty Images

Are you in your 20s? There's a decent chance you feel broke right now.

You’re earning an entry-level salary while trying to pay off college debt. You may be living with roommates, eating pasta and bagels because it’s cheap. You can't imagine owning a home or driving any car that isn't a $2,000 beater.

But despite your apparent lack of money, don't underestimate the power of this decade. Your 20s are an ideal time to set yourself up for a solid financial future. This is when you build the foundation that you'll stand on during your 30s, 40s, 50s and beyond.

How can you go about managing your money and establishing good financial habits in your 20s? Here are 5 tips you can start with today.

1. Live Like a Student for Longer Than Necessary

You’re at a unique age where it’s socially acceptable to continue living like a broke student. Do yourself a favor and maintain this broke student lifestyle even after you get your first job and a few promotions.

Keep living with roommates for as long as you can. Continue cooking dinner at home rather than dining at restaurants. Keep wearing clothes from thrift stores or discount shops. Follow the actions you took when you were a student without a decent paycheck.

2. Earn Extra Money

Hustle during your spare time. When you were a student, you probably balanced going to school with working a part-time job during evenings and weekends. In other words, you balanced a full-time job being a student with an additional part-time job.

Now that you’re in the workforce, there’s no reason you can’t continue with it. Balance your full-time job with a supplemental part-time job, even if it’s only 5 to 10 hours per week. This can help you make huge progress towards your financial goals.

3. Focus on Your Career

Your 20s are a prime decade to focus on advancing your career. Give 110% of yourself while you’re at work and think carefully about career moves.

Work at companies where you have a good chance of advancing up the ladder. Seek to meet the right people who can create a strong network of opportunities for you.

It’s also okay to take a slight pay cut if it means getting to be in a position that has more room for growth.

4. Start a Retirement Account

Open a 401(k) or IRA account and contribute at least 15% of every paycheck into it. Your retirement account should be considered a need rather than a want. You should take this as seriously as you take any other bill like rent or utilities. Your future self will thank you.

5. Prioritize Debt Repayment

By living like a broke student and earning extra on the side, you have an opportunity to repay your college debts or other debts.

Be as aggressive as possible without harming your retirement account. You might have to figure out how to strike a balance between repaying debt, saving, and investing—but don't neglect any of these three categories. They're crucial to building your financial base.