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Tips and Tricks on How to Start Saving Money in Your 20s

Two girls saving money

It’s never too late to make a change in your finances for the better. If you are in your 20s and interested in creating a solid financial foundation for your future, you should start doing a few things today. Here are a few steps that, if followed, can set you up financially, starting today and stretching far beyond.

Know Your Why

It’s essential to know your why before you start budgeting, saving, and investing. Knowing your why helps you stay on track when you want to give up. Start by asking yourself these questions:

  • Where do I see my finances and lifestyle in the next twelve months to three years?
  • Why do you want to transform your finances?
  • Do you have a savings goal that you want to reach while you’re still in your 20s?

Write down your answers to these questions and all the possible experiences you wish to have in your 20s. Determine the dollar amount you need to live your desired lifestyle. Don’t let this step overwhelm you, even if you are nowhere near this amount. Revisit your why every three months or so to help you make consistent budget decisions.


Now that you know why you want to start saving money in your 20s, the next step is to create a budget that will help you get there.

When creating your budget, you want to be as accurate as possible with the amount of money you bring in and what you expect to flow out. Consider these elements to be of the utmost importance as you start building your budget:

  • Create a budget to cover your basic expenses and stick to it.Lower costs
  • Look realistically at your current expenses, as well as your existing debt.
  • Consider what big purchases you plan to make in the next six to twelve months.
  • For the next 30 days, track your spending without judgment.

Reduce Living Expenses

For most people, rent or mortgage is their highest expense. If possible, try to reduce this amount and other expenditures like transportation, debt, and entertainment. A good rule of thumb is to allot 30-40 percent of your income to total living expenses.

If you are in a lot of debt or have high living expenses right now, your numbers may vary.
But you can get creative. Can you take public transit instead of having a car payment? Is it possible to live with family or friends to reduce rent costs? Cutting back in these areas will make a difference.

Debt Reduction

If you have gotten yourself into a lot of debt in your 20s, you want to make sure that you tackle debt reduction right away. Start paying off the debt with the highest interest rate first. This way, you are paying less interest and reducing the principal debt amount. When taking on loans in the future, only take as much as you need and pay back early if there are no penalties for doing so.

Emergency Fund and Extra Savings

Once you have set your budget and controlled your debt, you will want to create a few different types of savings accounts. The first is an emergency fund. An emergency fund is savings that can support you if there is a change in your income. A good plan is to have three to six months of your entire living expenses covered. You also want to have a separate savings account for big purchases like a car or a vacation.

Increase Your Income

In addition to saving for big purchases and adding to your emergency fund every month, consider increasing your income and savings by getting a side hustle. This could be a business that produces passive income, a second job, or a freelance gig that monetizes the skills you have. This infusion of cash will help you reach your savings goals faster.

Investing + Investing

Your budget is working, you have three to six months of income saved, and you have paid down your debt. It’s time to start thinking about retirement and investing.

If you work for a company that offers retirement accounts with a matching program that will match what you contribute to a certain percentage, make sure to enroll and max out your contribution.

If you are new to investing, consider Robo investor apps where you take a portion of your income, and they consistently invest it for you, so it grows over time. Ultimately, you will see a positive shift in your finances once you begin investing and saving together.

Get The Support You Need From Power Finance Texas

Sometimes the unexpected happens when you’re busy building better money habits in your 20s. Power Finance Texas is here to help in those moments when you need extra support with a quick, short-term loan. Contact Power Finance Texas to apply.