Did you know making 5 smart financial moves in your 20s can help you achieve long-term financial success?
Probably not, as majority of Americans have less than $1,000 in their savings. Reality is many of us were not taught how to handle our personal finances, so big money mistakes were bound to happen early on.
And honestly, if you are 20-something, it’s probably not the most fun thing to be thinking about money. However, the financial decisions you make now, can set you for a more secure future.
Also Read: 9 Healthy Financial Habits You Need to Better Your Financial Future
5 Smart Financial Moves That I Wish I Made in My Early 20s:
1. Budgeting
Don’t roll your eyes just yet. Chances are you probably heard of this word before and thought it meant you would be restricted from doing things you enjoyed. But that’s not true, not every budget has to be restrictive.
A budget is simply a money plan that helps you become more aware of where your money is truly going. All of the best money moves for your 20’s involves budgeting.
Having a budget will help you streamline your spending, prevent you from going into debt, and help you prioritize your financial goals. There are different methods of budgeting, there is not a one size fits all, you have to try some and see which one suits you best.
2. Automate Your Savings
Automating your savings is a smart financial move to make in your 20s. Automating your savings ensures that you don’t have to worry about setting aside money every month—it’ll be done automatically.
Set up an automatic transfer from your checking account into a savings account every month—once it’s set up, then it will happen without any effort on your part! You do not have to think about it or be tempted to use that money. This way, you are effortlessly growing your savings!
My bonus tip would be to increase your savings contribution every year, to be able to reach your savings goal faster.
3. Don’t ignore your 401k/403b
Saving money is good for short and mid-term financial goals. However, to truly prepare for your financial future, you need to start investing.
401k and 4o3b accounts are types of employer-sponsored retirement accounts which some employers offer. With these types of accounts, a few investment plans are offered by the employer.
In fact, contributing to these accounts is usually how most people start investing without knowing they are! Don’t ignore them, as they can be a powerful account to help you reach long-term financial success by investing early and often.
It’s easy to get started. First, you have the opportunity to select which investment you want your money to go towards. Next, you set a percentage or a set amount to be automatically deducted from your paycheck to be invested.
This money is taken before you get your paycheck which makes it that much easier to contribute to! (Keep in mind, if your employer offers you an employer’s match, then you should at minimum, aim to contribute up to that amount. If you don’t contribute to the match, you are basically leaving free money on the table.)
My bonus tip would be to increase your contributions at least by 1% every year in hopes to one day max it out your account. In 2023, the max contribution for anyone under 50 is $22,500 and $30,000 for those 50 or older.
4. Roth IRA
Investing your money is how you can long-term build wealth. If you want a healthy financial life that sets you up for retirement, then start investing beyond your 401k/403b.
If you have earned income and meet the IRS income limits, you should open a Roth IRA. A Roth IRA is an individual retirement account, to which anyone that has earned income can contribute after-tax dollars. In 2023, the max contribution for anyone under 50 is $6,500 and $7,500 for those 50 or older.
One of the best benefits of this account is that since you fund with after-tax dollars, at age 59 ½ you can withdraw both your contributions and earnings tax-free. This means you will not pay any taxes upon withdrawal! Now that’s how to take care of your money, if you ask me.
Remember when it comes to investing, the earlier you start, the better! Even if you’re not in your 20s anymore and you’re reading this, it’s better to start now than never!
5. Spend Intentionally
Chances are with so many influencers promoting different brands, and displaying their fabulous social media life, you’ll get persuaded into buying what they have.
Spending money on things you want is not the issue; overspending is. Overspending will lead to consumer debt.
It’s no secret that I was a shopaholic for years! I was mindlessly spending so much money every weekend buying clothes and shoes. Truthfully, I really didn’t need to buy so much and chances are you probably don’t either.
By being intentional with your spending, you could have excesses you can put to better use, while, avoiding consumer debt because you are able to pay off your credit card in full.
Be intentional about what you choose to spend money on and where it goes. Regularly evaluate how much you are spending in certain areas (use your budget for a clear picture) and seeing if that aligns with your values and current financial goals.
Ultimately, adding these 5 smart financial moves in your 20s, you will be able to manage your finances better. By doing this consistently, you will be on your way to securing your financial future. I know because, at 27, I started to implement these 5 smart financial moves and since then I have been able to change my financial trajectory for the better. So what are you waiting for?
If you feel that you need 1:1 support to help you get your finances right, schedule your free 15 minute discovery call so that we can discuss your situation and financial goals.