Your 20s can be an energizing time in your life as you navigate friends, love life, and career paths. 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.
If this sounds like you, there are ways you can reverse a downward financial spiral and meet your long-term goals. Here are some essentials to follow so that you can navigate yourself out of your 20s and into your 30s with your finances under control.
Set realistic goals for the present.Maybe you’re looking for a new job that will pay better. Whether that job comes sooner or later, setting strict but realistic goals for your present lifestyle can help get you back into the green. This means you might have to try living below your means for a short while, which can be tough, but well worth it in the long run.
Create a budget. The first thing you should do is look at all your monthly expenses. Carefully tracking your purchases and expenses can be arduous, but if you notice you're spending too much every week on fancy green tea smoothies, it might be time to start making them at home. Budgeting allows you to self-correct your spending habits, so you can pay for your next auto loan or utility bill. There are also different ways to budget. For example, the 80/20 is designed so that you put 20% of your income toward savings and the rest toward your monthly expenses—ideally, 50% toward necessities and 30% toward recreation or personal use. Explore various budget methods, so you can find the one that works for you. There are also free budgeting apps that are convenient and easy to use.
Make a savings account.Everyone knows it’s important to save money, but that doesn’t mean everyone does it. While it can be a struggle, it’s the best way to ensure a financially secure future. Whether it’s a job loss or a medical emergency, hard times can hit at any moment. But having a nest egg to fall back on can help keep you from stumbling too hard. That’s why creating a savings account that serves as an emergency fund is important. It’s meant to be a fluid account, so even if you dip into it occasionally, that’s okay because you’ll build it back up.
Keep your credit score up.Experts advise checking your credit score annually. But the best way to keep your credit score in pristine condition is by paying back loans and your bills on time. Going beyond the 30-day grace period means your credit score will take a hit and you’ll be less likely to get that loan or apartment you want. Of course, if you don’t have credit, now is the time to start building. While opening a credit card can be a great way to do that, you’ll want to pay it off each month. Otherwise, you could be creating more debt for yourself.
Get credit counseling.If you’re overwhelmed by debt, making an appointment with a credit counselor can be a great first step to getting that under control. A credit counselor will work with you on your budget, and if you qualify, may advise a debt management plan. This is where a credit counselor works with your lenders to lower your interest rates and consolidate your loans into one affordable monthly payment, so you can pay it off in three to five years.
Whether you get credit counseling or manage your own budget successfully, embracing financial literacy and taking control of your budget will ultimately help you decide your next step on your life path—without the gloom of debt hanging over you.
FAQs
Set realistic goals for the present.
Is it normal to struggle financially in your 20s? ›
For many young adults in their early 20s, balancing finances and a social life can be a juggling act. With student loan payments, rent, insurance and more, it's no surprise that many 20-somethings push off saving and investing money because they don't know where to start or don't have time for it.
Is it normal to have no savings in your 20s? ›
It is normal yes. Most people have not yet settled into their personalities in their 20s yet. They don't know what they want to be or how they want to be. There are a lot of things changing and it's hard for them to hold onto money.
How to become financially stable in your 20's? ›
Financial moves to make in your 20s
- Develop good budgeting habits. ...
- Pay down debt. ...
- Automate your savings. ...
- Build good credit. ...
- Start saving for retirement. ...
- Make sure you and your loved ones are covered financially. ...
- Work toward owning your home.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Where should a 25 year old be financially? ›
By age 25, you should aim to have an emergency fund of 3-6 months of living expenses, and start regularly contributing to retirement savings to take advantage of compound interest over time, even if it's just small amounts.
At what age are most people financially stable? ›
That said, the typical age of financial independence should be between 20-23 years old, according to a Bankrate survey.
Is saving $200 a month good? ›
If you don't yet have an emergency fund, it's never too late to start building one. By contributing $200 each month, your fund will add up throughout the year -- $2,400 is a solid amount of cash. Since most checking accounts don't earn interest, keeping your extra funds in a savings account is smart.
Is saving $1500 a month good? ›
Saving $1,500 per month may be a good amount if it's feasible. In general, save as much as you can to reach your goals, whether that's $50 or $1,500. You could speak with a certified financial planner to help develop a plan for your finances if you aren't sure how much money to save regularly.
How much do most 25 year olds have in savings? ›
Savings by Age
| Age | Average Account Balance | Median Account Balance |
|---|
| Under 35 | $11,250 | $3,240 |
| 35 to 44 | $27,910 | $4,710 |
| 45 to 54 | $48,200 | $6,400 |
| 55 to 64 | $57,670 | $5,620 |
2 more rowsSep 19, 2023
- Your 20s are about establishing a foundation as you gain financial independence.
- Set a budget that balances your needs, wants and wishes.
- Create a plan to pay off debt and stick to it.
- Begin building your credit.
- Start an emergency fund of up to three months of living expenses.
If you don't already have a checking and savings account, it's time. Not only is a checking account necessary for paying bills and accessing your cash, it's a sign to future creditors, employers, and landlords that you can responsibly manage money.
How much should a 30 year old have saved? ›
Fidelity suggests 1x your income
So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards. Assuming that your income stays at $50,000 over time, here are financial milestones by decade. These goals aren't set in stone. Other financial planners suggest slightly different targets.
How to budget $5000 a month? ›
Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.
How much should rent be of income? ›
A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your gross income) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."
Is it normal to be in debt in your 20s? ›
Millennials and Gen Z represent a wide range of ages and credit profiles, but both include consumers in their 20s. Having more than $10,000 of debt might sound like a lot for someone at the beginning stages of their career, but it's not all bad as long as you're strategic with your pay-off plan.
How much money should I be making in my 20s? ›
Average Salary for Ages 20-24
The median salary of 20- to 24-year-olds is $720 per week, which translates to $38,012 per year. Many Americans start out their careers in their 20s and don't earn as much as they will once they reach their 30s.
Is it normal to live paycheck to paycheck in your 20s? ›
Nearly 70% of millennials and over 65% of Gen Z are living paycheck to paycheck, according to the February 2022 LendingClub Paycheck-to-Paycheck Report. Looking to escape the paycheck-to-paycheck trap? Experts say one of the most important keys is living below your means.
