It doesn’t seem like it was that long ago that I was in my twenties, but the reality is, it’s been %$# years.
My 20s were chockfull of memories, transformations, and lessons. Some of the hardest lessons I had to learn (sometimes over and over again) were financial lessons. Whether you have a strong financial literacy educational background or not, for some of us, the impulsivity and immaturity of our twenties can lead us to make some significant financial missteps. If I ever had a chance to talk to 20-year-old me about money, I’d have a few key tips:
1. B-U-D-G-E-T
One thing that I’ve learned since sailing past my 20s is that it doesn’t matter if you make $10,000 or $100,000; if you don’t know how to budget, you’ll never have control of your money. For some people—myself included at one time—a budget can feel like your control is being taken away, when in actuality, a budget puts you in the driver’s seat of your finances. Instead of your money telling you what to do, a budget allows you to tell your money what to do.
If given the chance, I’d tell my 20-year-old self to create a realistic, attainable budget; to spend less than I made; and to be honest with myself about what my spending habits really looked like instead of putting my head in the sand, going to brunch, and swiping my debit card.
If you’re in your 20s, or if you know someone in their 20s who could use a little financial guidance, my advice is to create a budget that is aimed at helping you achieve your goals but is still flexible and comfortable enough to allow you to enjoy the fruits of your labor. Then, make sure you reevaluate every so often to make sure everything is on track—particularly if your income or expenses change.
2. Be prepared for an emergency
One flaw many youths possess is the feeling of invincibility. The fact is, emergencies will happen. Your car will break down. Your furnace will go out. You might have some type of health emergency or need to hop on a flight to be there for a family member or friend. It’s important to have an emergency fund to help finance these types of expenses so you aren’t forced to use credit cards, borrow from your parents, or take on other forms of debt to pay for them.
3. Don’t misuse credit
I got my first credit card when I was a freshman in college. It had a $10,000 limit and I made about $7 an hour at my part-time job. Back in those days, there were no regulations in place to shield students and young people from predatory lending activities, and in hindsight, I actually dodged quite a bullet. While I certainly misused that credit card, I never got close to the limit, but so many 20-somethings fall into the credit-card-debt-trap, charging far more than they can afford to pay each month. The average American household carries a $5,700 credit card balance, and although the percentage of Americans who carry credit card debt has declined over the last decade, consumer debt can still be problematic if not managed responsibly.
If given the chance to talk to my 20-year-old self, I’d tell her to generally avoid credit cards altogether and to only borrow responsibly.
I’d like to think that 20-year-old me is proud of the financially responsible 30-something I’ve become. I’m grateful for the missteps and learning lessons I experienced because they prepared me for a more financially stable future.
Victoria Penn is the AVP of Marketing for SWBC. She manages a team of marketers that develop traditional and digital marketing strategies. She also leads the Content Marketing Strategy for SWBC.
FAQs
It's generally recommended that you save between three and six months' worth of expenses for emergencies. For example, one person spending $1,500 per month might need to save $4,500, while another person spending $2,000 per month might aim for a rainy day fund totaling $6,000.
Where should I be financially at 20? ›
Most financial advisors recommend keeping two to six months' worth of expenses in an emergency savings emergency savings account. Aiming to save your first $1,000 is a great place to start. Prioritize an emergency fund and your retirement plan when it comes to your saving goals.
What I wish I knew about money in my 20's? ›
B-U-D-G-E-T
If given the chance, I'd tell my 20-year-old self to create a realistic, attainable budget; to spend less than I made; and to be honest with myself about what my spending habits really looked like instead of putting my head in the sand, going to brunch, and swiping my debit card.
What advice would you give your younger self about money? ›
Be intentional in your money decisions
Before you start spending, give careful thought to ALL the jobs that money can do for you. Money can buy things but it can also, depending on how you use it, create stability or help you reach goals you set for yourself.
What is the 50 30 20 rule? ›
The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.
What should a 20 year olds net worth be? ›
Average net worth by age
| Age by decade | Average net worth | Median net worth |
|---|
| 20s | $106,601 | $7,487 |
| 30s | $298,379 | $35,344 |
| 40s | $752,363 | $125,434 |
| 50s | $1,361,319 | $289,633 |
4 more rowsKey Takeaways
It's never too late to start saving money for your retirement. 401(k)s and traditional individual retirement accounts (IRAs) are among the most popular choices.
Is it normal to struggle financially in your 20s? ›
Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn't paying you enough, you're struggling to make rent, have no savings, and are being crushed by debt.
What age do people peak financially? ›
According to the U.S. Bureau of Labor Statistics, the median income of American workers is highest between the ages of 45 and 54. These peak earning years are a critical time to take control of your finances and hone your money management strategies.
What is the best way to get rich in your 20s? ›
Here are five general steps that can help you get an early start.
- Save Early and Often. Saving early can help you leverage compounding interest, which is a core principle of building wealth. ...
- Live on a Budget. ...
- Diversify Your Investments. ...
- Save an Emergency Fund. ...
- Work With an Advisor. ...
- Bottom Line. ...
- Tips for Building Wealth.
Life Is Too Short, Don't Take Yourself Too Seriously
He used to say that “You shouldn't take yourself too seriously” and that's exactly how I'll remember him: always smiling, cracking jokes, and making others laugh.
What should you start saving for in your 20s? ›
Financial goals in your 20s often include building an emergency fund, paying off high-interest debt, and let's not forget about saving for retirement. While you probably want to be able to see the show when your favorite band comes to town, think twice. You shouldn't spend at the expense of your future.
What advice would you give your old self? ›
Advice My Future (10 Years Older) Self Would Tell Me Today (And Why I Need to Listen)
- LISTEN. ...
- DON'T HOLD ONTO WORRY OR ANGER FOR MORE THAN 5 MINUTES. ...
- TRUST YOUR GENUINE AND REAL YOU, AND QUIT SECOND-GUESSING YOURSELF. ...
- SEEK TO UNDERSTAND FIRST INSTEAD OF JUDGING WHEN IN A DISAGREEMENT.
What is a piece of advice to younger self? ›
Always take time for yourself, even if you are married and have kids, remember to take time for YOU, don't lose yourself in your relationships. Saying no is OK! Don't compare yourself to others, your journey is your journey. Treat others as you want to be treated.
What is the least helpful advice you ve ever received about money? ›
Some of the worst financial advice you can get is to only make minimum credit card payments. It's better to pay your balance off in full when the statement comes. Why? Otherwise, you'll end up paying interest that will keep your bill increasing and making it all the harder to whittle down your debt.
How much money do I need at 20? ›
Rule of thumb? Aim to have three to six months' worth of expenses set aside. To figure out how much you should have saved for emergencies, simply multiply the amount of money you spend each month on expenses by either three or six months to get your target goal amount.
How should a 20 year old budget? ›
The 50/30/20 budget
A good goal is spending 50% of your income on needs; 30% on wants; and 20% on savings and debt paydown beyond minimums. (Your budget may look different if you're just starting out or live in a high-cost area.)
Is $20,000 a good amount of savings? ›
Depositing $20,000 in a savings account is wise when you have a plan for the money, such as a near-term expense or rainy day fund. For long-term goals, like retirement, you might be better served by opening a brokerage account or certificate of deposit (CD).
Is 20K savings good at 25? ›
20k is the ideal savings amount for a 25 year old
“So if you manage to save 15% to 20% of your income, you've made a good start to reach this amount by the time you're 25.”
