Managing finances is no walk in the park. Who would have thought figuring out what to do with your money would be this hard? But, there’s good news if you’re wondering what to do with your money in your 20s. Have no fear—you can take advantage of smart money moves in your 20s to get you on track to hit your financial goals by 30!
We’re here to let you in on the best financial things to do before 30,so sit tight and let’s get this money train rolling!
1. Open a Checking Account
Prepaid debit cards can get the job done, but you’re missing out if you don’t have a checking account. You can deposit checks, pay off debts, rack up more money in savings, and even make investments from your checking account. With some banks, you can also earn cash back by using your debit card to make purchases!
2. Set Up Direct Deposit with Your Employer
Direct deposit is a huge convenience; it automatically adds your paycheck to your bank account, letting you skip the ATM and long lines at the bank. You don’t have to deposit it into just one account. Set up your direct deposit so a portion goes directly to your savings or investment accounts to maximize your earnings.
3. Build an Emergency Fund
If you’re not sure how much money you need to set aside for emergencies, build an emergency fund first. You’ll be glad for the extra funds when the time comes.
How much should you save in your 20s? Start by setting aside $1,000 and work your way up to saving three months’ worth of expenses.
4. Open a Savings Account
Opening a savings account is one of the best financial moves to make in your 20s. You can take advantage of higher interest rates to grow your savings faster. A savings account is a great place to stash your emergency fund, too.
5. Create a Budget
Many people in their 20s think a budget is a bad thing. The truth is that it’s nothing more than making a plan for how to spend your money. Making a budget ensures you have enough money for the things you need while also setting aside cash for long-term goals.
6. Use Automatic Coupons
Gone are the days of clipping paper coupons each week. Instead, digital coupons are where it’s at. Save money when online shopping and free up room in your budget by downloading a Chrome extension like Piggy to take advantage of coupons and cash back automatically.
7. Develop a Marketable Skill
You need to earn some cash before asking yourself, “What to do with my money in my 20s?”. Think about developing a marketing skill that you can take with you as you grow in your career.
You may not love your first job, and it won’t be your last job, but consider “transferable skills.” For example, maybe you learned Excel, email etiquette, or writing. Take those skills and look for opportunities to advance in your career.
8. Negotiate a Raise
Negotiating a raise is key to earning more money, and earning more money can help you reach your financial goals faster. Asking for more pay can be nerve-wracking, but it’s important to know your worth. When talking to your employer, highlight the work you do that exceeds expectations and include metrics that demonstrate your value.
9. Set a Savings Goal
When you’re thinking about “where should I be financially at 30?,” consider the goals and values you have. Do you want to pay off your student loans by a specific date? Buy a house? Or build a life around your love of travel?
Set a savings goal, then create a plan to make your dream a reality!
10. Open a Retirement Account
Are you wondering how to build wealth in your 20’s? Consider opening a Roth IRA or a retirement plan with your employer if they offer one. You may not have to pay any taxes on the money you contribute, which can lower your tax bill every April.
11. Rank Your Debt by Interest Rate
The average 20-something has $10,942 in debt, not including a mortgage. Ranking your debt starting with the highest interest rate can help you create a plan to pay it down. Plus, going after high-interest debts first gives you more opportunity to save money on interest fees.
12. Pay Off Your Credit Card Debt
Paying off debt is one of the best money moves to make in your 20s, and credit cards usually have the highest interest rates. When you’re deep in credit card debt, every purchase can feel like a struggle and every financial decision can feel like a gamble.
13. Buy a Cheap, Reliable Car
You don’t need to go into debt to buy a car. While the average price for a car is over $40,000, you can get reliable transportation for much less. Check your budget and savings goals to see how much you can truly afford, and spend less than that.
14. Shop Around for Auto Insurance
Owning a car is expensive, but it’s true what they say—shopping around can save you money on auto insurance. Use a comparison shopping site to get multiple quotes from various providers in seconds. And if you want to stick with your current insurer? Ask if they’ll match the lower quote from a competing company.
15. Clean Up Your Online Presence
Current and potential employers and colleagues will look at your online profiles. What will they find? If it’s endless photos of red solo cups, it’s time to clean up your digital act. Search for yourself online to see what you find and double-check your privacy settings on Facebook, Instagram, and other networks.
16. Open a High-Interest Savings Account
A savings account is an excellent financial tool, but don’t overlook the power of a higher interest savings account. Numerous banks offer high-interest savings accounts that offer larger returns than certificates of deposit.
17. Open a Brokerage Account
You might already have a retirement account, but a brokerage account is different. It lets you buy and sell securities like stocks, bonds, mutual funds, and ETFs (exchange-traded funds). Unlike retirement accounts, brokerage accounts have no annual cap, so you can invest and grow your wealth without limits.
18. Get a Robo-Advisor
If you don’t have much experience investing, consider using a robo-advisor like Betterment, Ellevest, or Wealthfront. A robo-advisor can invest in stocks or bonds and automatically handle your investments for a fraction of what you’d pay a traditional advisor. If you’re new to investing, start by investing $50 to practice trading.
19. Hire a Human Financial Advisor
Robo-advisors can only get you so far. At some point, you’ll need to hire a human advisor for financial advice—even before you’re 30. They can help you make a plan to achieve a big goal, like buying a house and saving for retirement, and answer all your money questions.
20. Apply for a Credit Card that Fits Your Goals
Different credit cards have different perks, so make sure you find the right credit card for your lifestyle. For example, some can give you cash back to help you save money, and others offer travel rewards to satisfy your wanderlust. But keep in mind that you need to track how you’re using your credit cards, so you don’t rack up a mountain of debt.
21. Get a Costco Membership
Costco lets you buy in bulk, getting you better per-item prices than purchasing individual items. But, there are other ways to save too. For instance, you can get wholesale prices on tires, concierge services if something isn’t quite right after buying a big-ticket appliance, and discounted gift cards.
22. Find Out Your Credit Score
Check your credit report to discover your credit score. It’s more important than you may realize. Without a good credit rating, you’ll have trouble buying a cell phone, renting an apartment, and getting a car note. A low score can even mean you’ll pay more for car insurance!
23. Evaluate Your Debt to Income Ratio
A debt to income ratio is simply a measure of how much you owe compared to how much you earn. It’s a good indicator of your financial health. A higher ratio suggests greater financial instability. To get your number, divide your monthly debt by your monthly income.
24. Consider a Career Change
Sometimes, figuring out how to be smart with money in your 20s can include a career change. If you’ve been living at home with your parents, a career change can give you a financial boost to get out on your own.
25. Buy Groceries at Aldi
Aldi is more than a discount grocery store. Their products are usually high quality and come at super-low prices. They also carry natural and organic products that are much less expensive than what you’ll find at a traditional grocery store.
26. Get Key Financial Documents in Order
Lots of 20-somethings let their parents hang onto their birth certificates, Social Security cards, and other official documents. But you—not your parents—should have these documents on hand and stored in a safe place.
27. Do Your Own Taxes
Taxes can seem intimidating when figuring out how to manage money in your 20s. DIY programs, like TurboTax, make it easy by walking you through each step of the process. Doing your own taxes can help you save on accounting fees. Plus, it’s an excellent way to see how much you earned throughout the year, which can help with your budgeting goals.
28. Create a Will
You might think you’re too young to have a will, but if something happens a will can make sure your family knows exactly what to do. Most likely, you don’t need anything more than a “simple will.” Spend 30 minutes with an online estate planning company like Trust & Will or contact an attorney. If the worst should happen, your loved ones will be glad you did.
29. Purchase Life Insurance
Buying a life insurance policy is a smart money move in your 20s. The younger you are, the cheaper your policy could be. Plus, it can help your loved ones pay for funeral expenses and outstanding debts.
30. Donate to Charity
Giving back is one of the most selfless things you can do. You can start giving back by volunteering for a worthy cause such as a local animal shelter. Then, once you have more money, donate your time and money to causes that matter to you.
Hit Your Financial Goals by 30
As you start to approach your 30s, you may begin to wonder, “What should I do with my money in my 20s?” Remember: the sooner you start making a financial plan for yourself, the brighter your future will be.
Do some planning and research on what the best path is for you. While you want to make sure that your 20s are full of memories, you also want to use your time and resources to set yourself up for success in your 30s.
At the end of the day, making smart money moves in your 20s helps you get ahead financially and gives you the freedom to make better money decisions for the rest of your life.