Leading data suggests that only 24% of millennials are financially literate.
The good news? You can get started in a new direction today, even if you’re a student or have a lot of debt. Here are our most essential tips on how to be smart with your money in your 20s.
1. Minimize New Debt (And Pay off What You Have!)
How can I maximize my money in my 20s? Your wallet might be one excellent place to begin. The first step for anyone hoping to get on their feet should be avoiding mindless plastic spending. But that’s only the beginning.
2. Build Your Credit
An excellent credit score empowers you to make better financial moves more quickly as your wealth grows. Personal loans, mortgages, and better rates across the board are only a few benefits you’ll enjoy.
Secured credit cards can help those just getting started. Ensure that all your bills and payments are made on time, keep your credit utilization rate low, and do what you can to increase your net worth.
3. Maintain an Emergency Fund
Few people are concerned with the future in their early 20s. However, thinking ahead is one of our top recommendations regarding how to be smart with your money in your 20s.
An emergency fund ensures you’re never set back too far in the event of something unexpected. An injury, an illness, or a car accident can and should be absorbed with enough money in the bank ahead of time.
How much should someone in their 20s have saved? Many experts suggest an emergency fund to cover approximately six months’ worth of living expenses. This includes rent, food, and payments on any outstanding balances, including credit cards and student loans.
4. Get Health Insurance
A medical disaster down the line could be all it takes to wreck even the best-laid financial plans completely. If you’re working on learning how to be smart with your money in your 20s, this may very well be the first thing to consider.
5. Perfect Your Budget
After nailing down your total net income, you can use this figure to work all your essential expenses into the picture. If you’ve never budgeted before, we challenge you to keep a spending diary for one month or even go on a no-spend challenge.
Less is more—unnecessary purchases, splurges, and stuff you don’t need are all included. If you can avoid spending a given sum of money, that’s more you’ll have later.
6. Think about Retirement
Most people see themselves retiring at some point. If you include yourself among them, you should get the ball rolling as soon as you become a working adult.
Employee matching programs, 401k accounts, IRAs, and even a plain old savings account will all contribute to a comfortable life in your golden years. If you’re not already involved with a retirement plan within your role, you should inquire into the option as soon as possible.
7. Earn More When You Can
How can I maximize my money in my 20s? The millennial philosophy: side hustles can pad your wallet monthly, freeing you to do more and save more.
If you’re due for a raise, do what you can to ease your boss into the notion. They say to “act your wage,” and going above and beyond in the workplace is an excellent way to make a good impression.
8. Invest in Your Real Future
Your money can only do so much for you while sitting in the bank. Once you’ve accumulated a healthy emergency fund and are making more than enough to cover your basic living expenses, we recommend getting your gears turning. How can I maximize my money in my 20s? The better question is: what more could the money I’ve saved be doing for me?
Sometimes, a long-term investment may boil down to the difference between renting and owning. Other scenarios may involve investing more directly, building your portfolio of assets, and managing them for the best possible return.
A rental property? A new piece of equipment relevant to your trade or certification that may help you advance professionally? All are excellent ways to invest in what’s ahead. Think about where you’d like to be in ten years and plan each move forward accordingly.
And, if you need money right now to make it all happen, apply for an installment loan with Power Finance Texas.