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15 Smart Money Choices to Make in Your 20s

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The smart money choices you make in your twenties, early in young adulthood can you shape your entire financial path in the future.

Are you making the right financial choices? You could be making this simple money mistakes without even realizing it? It’s tough to say but this roundup of smart money choices will help open your eyes:

  • Start a Savings Plan
  • Ditch Your Debt
  • Get Budget Savvy
  • Build a Frugal Mindset
  • Pack Your Lunch
  • Invest
  • Create Savings Goals
  • Get Life Insurance
  • Spend Your Money on the Right Stuff
  • Build Your Credit
  • Monitor Your Credit
  • Educate Yourself on Personal Finance
  • Have Open Financial Talks with Your Partner
  • Practice cooking at home

Keep reading for some core advice to help you make the best financial decisions for yourself.

1. Start Saving

It’s never too early to start to save. Regardless of how little or how much you can contribute to savings, it’s an important habit to form while you’re young in your twenties, or even before.

I started saving in high school. I got my first job at 15 and I still remember my first paycheck of $49. I was so excited to go to the bank with my mom to cash my check. Prior to working, I do housework and my allowance was $5/week so more than doubling my income from just 2 weeks was so incredible to me.

We went to the bank, opened my account and I ended up depositing about half and getting half back (since a deposit is required to open a bank account, usually). I was still thrilled.

I got my first debit card and from that point, I started saving a small portion of my tiny checks. It started then!

Here’s how you can start saving:

Make it easy on yourself and rather than manually transferring from checking to savings, have your employer do it! You can set up a second direct deposit to fund your savings account straight from your paycheck so you never have to touch that money.

This hands-off approach makes it easier than ever to save and takes away the temptation of spending that money that comes from doing a manual transfer.

When I worked as a banker, I set this up from the start and it was suggested in new employee orientation, which was pretty neat. It was super simple to adjust how much I was saving and over time I had the power to increase my autopilot savings from my paycheck. It was great!

How Much to Save?

Start with saving 10% of your income. As you can, increase this amount while still maintaining a comfortable lifestyle. This may not seem like a lot to save but it will accumulate over time and you will have so many other opportunities to boost savings including:

  • Bonuses
  • Tax refunds
  • Pay raises

This doesn’t even consider if you decide to do any side hustles that more and more people are starting to take on, like:

Here’s a roundup of more side hustles to peak your interest.

2. Ditch Your Debt

There is such a thing as good debt and bad debt. Debt actually helps you build your credit so it’s not as terrible as a lot of people make it out to be but, a little bit of debt can quickly tornado into a mountain of debt if you aren’t careful. In your twenties, you want to focus on paying off this kind of debt fast:

  • Student loans
  • High interest credit cards
  • Personal loans
  • Auto loans

Try Dave Ramsey’s Snowball Effect to pay off debt.

How it works:

This debt reduction strategy helps you get the small wins, giving you motivation to continue in your debt paydown plan. You pay off your debt in order of smallest to largest.

These are the steps laid out:

Step 1: List all your debts from smallest to largest, according to balance.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible toward your smallest debt.
Step 4: Repeat until each debt is paid in full.

Learn more about Snowball Method.

3. Get on a Budget

Budgeting is so critical and it’s best to develop and ingrain this personal finance habit while you’re young.

Budgeting brings so many amazing benefits:

  • Track your spending
  • Stay on top of all your purchase habits
  • Save more
  • Spend less
  • Create and accomplish personal finance goals with ease

In today’s digital age, you’ll be pleased to hear that there are so many personal finance tools available to help you.

Some incredible budget apps you can get behind:

These tools do it all, from grouping your purchases by category to showing you extra nonsense purchases you’ve made, alerting you if you’ve gone over budget and more.

4. Build a Frugal Mindset

Start this way of thinking in your twenties so it’ll stick as you move further into adulthood. Learn to live within your means, identify wants versus needs, and analyze your purchases.

Are you already living beyond your means?

Here are some warning signs that YOU ARE!

You can’t make your minimum payments

This is a big red flag. Is it tough to make your minimum payments on your credit cards and other bills? Big sign that you are living beyond your means.

Not making your minimum payments can do so much harm to your financial picture and credit standing.

If you find yourself in this situation, take action now. Increase your earnings, remove indulgent purchases, eliminate extras, and get yourself back on track.

In the meantime, reach out to your creditors. It might feel scary but creditors are there to help and many times have flexible payment options available to suit many financial circumstances.

You run out of food

Yikes, running out of food is nearly on the verge of being homeless.

How does this happen?

If you aren’t on a budget and can’t manage your finances, it definitely can.

Running out of food means you are not being enough food, due to either:

  1. Not having enough income
  2. Overspending
  3. Not managing your finances wisely

It’s kind of like the starving college student who lives on ramen noodles because they are going to school without a job. This is no way to live and there are some major changes to make if you find yourself here.

Get a job or if you have a job, get a second job, ask for more hours, get overtime, or get a side hustle.

Quick way to make money when you’re in a pinch: These $300+ per month surveys can help!

You can’t save

You are unable to save and saving is super critical. Here are some unexpected expenses that can arise out of nowhere, at any time:

  • Car repair
  • Home repair
  • Unexpected travel expenses
  • Medical or dental expenses

There are even some crazy circumstances which might not seem likely but can totally happen:

  • You get evicted through no fault of your own (your landlord goes into foreclosure)
  • Your home gets a bug or rodent infestation (can be brought on by weather)
  • Your home and car gets destroyed by a tropical storm or tornado

I’ve experienced a handful of unexpected happenings this year alone.

My husband needed 3 emergency root canals 2 weeks ago. The bill, over $6,000, with dental insurance.

Ouch!

We also had to pay for a car repair that hit us by surprise (our family drives newer vehicles which you wouldn’t think would be subject to repair yet).

This stuff can happen to anybody at anytime. Be prepared with savings.

If you can’t save, you should figure out why:

  • Are you overspending?
  • Do you not earn enough?
  • Are your bills too high?

Start by cutting extra expenses including cable. Then, consider increasing your income with more work or taking on an extra income opportunity.

You are house poor

You are so happy to be living in a great neighborhood, with a gorgeous house and amazing car but you’re stuck at home all the time because you’re house poor. This means you earn enough to support your household but not enough for the extras in life like vacations, shopping, going to the movies, attending events, etc.

You are living beyond your means.

If you can’t change your lifestyle right away, which means ditching the house and car, that means you need to do a combination of slashing expenses and increasing your income.

5. Pack Your Lunch

Don’t get me started on how much money you will save by making lunch at home and bringing it with you to work! So much savings here!

When I worked for my previous employer, it was a pretty big company. I worked at the headquarters and it had over 20,000 employees and was bigger than the Pentagon. It was equipped with so many tempting amenities like gyms, basketball courts, sleep pods, Starbucks coffee stands, 7 cafeterias, and more.

It was like being a kid in a candy store when I first started working there. I quickly started paying for breakfast, lunch, and dinner at work.

Breakfast tacos and coffee for breakfast, followed by Subway or Wendy’s for lunch, and the food was so good with so much variety, I’d usually pick something up for dinner and take home. I haven’t even dived into the snacks yet-icecream carts, smoothie stands, coffee/tea, etc.

And, you could pay for everything with your paycheck. So, you grab your food and the cost is deducted from your paycheck. How easy is that!

I quickly started noticing a reduction of $200/month from my paycheck.

I knew something had to change quick.

I began by weaning myself off cafeteria food gradually. I couldn’t go cold turkey. I knew this about myself. So, I started avoiding breakfast and snacks. Then, I cut out grabbing dinner. Eventually, I packed a lunch at home and would bring it to work. So I completely eliminated purchasing food at work, 100%!

The moral of the story is, eating out for lunch can add up.

Pack a lunch to save money. Your wallet will be pleased.

6. Start Investing

Yes, investing starts in your twenties. It’s the perfect time to start saving toward your retirement. I remember I saw something on TV once about how to become a millionaire by starting a retirement account at age 25. It was so simple.

Here’s a similar resource which shares how to have millions saved in time for retirement by saving just $35/week.

What this looks like for you now:

At work, take advantage of 401(k) and make sure you are saving enough for the company match. So, if your company matches up to 8%, then do your best to save that 8%. It will be worth it!

Library of Helpful Investing Tips:

Investing Resources You Will Love:

  • Acorns (automatically invest your spare change)
  • Digit (automatic savings made easy)

7. Create Savings Goals for Things You Want

Just because you have a frugal mindset doesn’t mean you can’t get things you want:

  • Big screen television
  • Tropical vacation
  • State of the art computer

All those things can still be enjoyed, with a savings goal.

Start by thinking about what you want. This shouldn’t be hard.

  • How much does it cost?
  • How much can you save every month for it?
  • Can you get a discount (there’s that frugal mindset)?

Then, start saving. Once you’ve hit your savings goal, buy it!

And this is how you’ll handle those purchases whether it be an engagement ring, car, or anything at all.

8. Life Insurance

Yes you need life insurance. Even in your twenties. Because you never know what can happen and you don’t want to leave your loved ones with the expenses of funeral costs. Your twenties is the perfect time to get it because the cost of life insurance rises, the older you are. So, in great health at a young age, you can get a nice, low life insurance premium.

Talk to an advisor to discuss the right kind of plan for you (term or whole life) and more on what’s involved.

Life insurance companies are getting more and more innovative too. Check out this company that gives you free life insurance for living well.

9. Spend A Lot on the Right Stuff

Your twenties is a time when you are probably starting out your career. You may not be making as much as seasoned professionals in your industry but you may be at a time when you have a lot of disposable cash.

You might be single, living with roommates, have minimal expenses, only have to pay health insurance and other insurance expenses for just yourself, and other costs that balloon to cover the entire family when you’re older.

Take advantage of this and spend that extra income on the right stuff:

  • Paying off loans
  • Paying off credit cards
  • Paying yourself (boosting your savings)

Don’t miss out on this time that you may not get again.

11. Using Credit the Right Way

Credit cards aren’t the bad guy, necessarily. It’s your use of credit that can get you in trouble.

Credit cards are needed in many cases, to help you build credit.

When I was 18, I was ready to get my own place. I had graduated high school, completed two semesters of college and had been working a job for over 2 years.

The only problem?

I had no credit.

I found it very hard to get approved for an apartment even with a cosigner, without having a credit history myself so, I got a credit card.

I was surprised how easy it was to get one. It was a big bank credit card with a small $500 credit limit. The interest rate was 18% but it had no annual or monthly fees, it wasn’t prepaid or secured. I still have that card to this day and it’s helped me build a blossoming credit history.

So you see, credit cards aren’t all that bad.

Here are some tips to use them responsibly in your twenties:

  • Don’t outspend your income
  • If you can’t pay cash for your purchase, you can’t afford it, save instead
  • Start with one credit card
  • Make your payments on time
  • Don’t carry a balance greater than 20% of the limit

With this said, credit cards can have a lot of benefits, aside from helping you build your good credit history. Many cards come with amazing rewards programs to help you earn points, cash back, travel miles, gift cards and more.

Want to learn more about the perks?

Here are a dozen crazy (and not so crazy) ways to get points and cash back!

12. Building and Monitoring Your Credit

We shed some light on the importance of building credit above. Let’s recap:

  • Qualifying for an apartment or home to rent
  • Getting the best interest rates on credit products
  • Saving money on auto loans, home loans, etc.

Equally as important is monitoring your credit. Because, identity theft is very real and can wreck your credit. You can get one free credit report per year. Take advantage of this.

When you get your credit report, look for things like new accounts opened, negative accounts or collections, the number of lenders that have checked your credit, and credit report errors.

I was a victim of identity theft but I caught it. I caught a $9,000 student loan that was in the process of being paid out to a New Jersey university (I went to college in Texas) from a student impersonating me! I was so happy to have caught it and get the loan declined due to fraud.

Because I was alert and checked my credit, and signed up with an identity theft protection, I was able to catch it and avoid having my credit impacted!

Make sure to keep tabs on your credit history.

13. Educating Yourself About Personal Finance

Make the decision to get more involved with your finances and it can reward you in the future. As a twenty-something, you don’t know what you don’t know and the best way to overcome this is the educate yourself. When I was in my twenties, here are some things I did:

  • Read personal finance books
  • Followed budget and investing blogs
  • Talked to my Dad about investing
  • Watched the Suze Orman show on most Saturday nights
  • Watched Clark Howard

Being knowledgeable about your finances is so important and a useful skill to have and develop. Start in your twenties, or earlier!

14. Talk Money with Your Partner (or Family and Friends)

You can learn a lot just by talking it out. If you have a partner, talk finances with them. It’s an eye-opening way to make sure you both are on the same page. Talking openly about your financial picture can help you have a clearer picture of your household finances and this isn’t a “one and done” kind of talk, either.

Continue to have talks like this in the future and keep checking in because as time moves on, things change, people change, so you want the conversation to continue.

  • Set goals together
  • Celebrate financial wins
  • Talk about challenges and pitfalls
  • Make a plan for the future

My partner and I have totally different view on money and sadly we didn’t discover this until we were well into marriage (with 7+ years under our belt together). At that point, it was super difficult to shape purchase and savings behaviors.

I’m a saver and embrace frugal living while my partner is a spender. He believes that money exists to spend it and doesn’t think much about saving for the future.

While a lot of people would call this a nice balance, I firmly disagree.

We don’t argue about money which is great and over time both have us have given way on our financial stance, a bit. It’s all about compromise.

These can be tough talks to have sometimes but totally worth it so you two are in the know and on the same path financially to smart money choices.

15. Cook at Home

Last but not least, embrace a lifestyle where you cook at home. Cooking at home is so nutritious and you can tailor meals to suit your personal tastes. You save a lot of money and you can employ more money-savings strategies like batch cooking or freezer meals to save even more cash and save time!

I found these 31 insanely awesome tips to save money while cooking. This is the icing on the cake. Here are some of the tips shared:

  • Get whole roasted chicken (make chicken salad, casseroles, sandwiches, etc.)
  • Use a slow cooker (throw in leftovers to make a delicious meal with your scraps)
  • Get big cuts of meat and stretch it for meals to last the week
  • Meal prep
  • Freeze food to avoid throwing it away (like ripe bananas, bruised bell peppers that are ripening, etc.)
  • Meal plan
  • Frozen fruits and veggies
  • Shop according to what’s on sale

Today’s food landscape is varied. There are so many meal delivery options tempting you at every corner. It can be a challenge to ditch delicious-looking entrees in lieu of cooking in your kitchen.

I’ve found that a lot of young people splurge on eating out with apps like UberEATS or DoorDash several times a week! The costs add up fast and while you don’t have to ditch this completely, you should filter it out and try cooking meals.

Final Thoughts

Believe it or not, the path to financial success starts in your twenties. Don’t miss this critical time to start making smart money choices for yourself.

There are many strategies you can start employing to help you save more, spend less, live frugally, and build your financial success for the long term.  I hope you found this list of 15 smart money choices helpful.

Do you have some money advice to share? Comment below so we can hear your thoughts!

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