Young adulthood is a time of big decisions and major life changes. People in their 20s experience the rush of freedom and the pressure of responsibility. Money can be tight during these years, but this is also the time many people find their first steady job and make major purchases like a car or a house. Learning smart money habits makes your young adult years much easier and sets you up for success throughout your life. Check out these wise tips for managing money in your 20s.
Let’s Talk About Budgets
Creating and sticking to a budget is the key to keeping your finances organized. Remember that budgeting isn’t about never spending money. Instead, this habit simply ensures you don’t overspend on unnecessary purchases so that you have enough money for the necessary ones. In addition to setting aside money for bills, groceries, and other expenses, make sure you have a solid emergency fund and savings plan in place. Try to set at least three months’ worth of expenses aside for emergencies. This will give you peace of mind—and plenty of money—in the face of repairs, life changes, and other unexpected events.
Be Smart About Big Purchases
Your budget should also have a long-term savings fund. This will help you cover big purchases such as moving or buying a car. Your first years of adulthood will have several major purchases like these. While these expensive decisions can be intimidating, a little research will help you make the best choice for your budget and your life. For example, when buying your first car, make sure you research what kind of car you want as well as the kind of insurance policy you need. Thinking ahead like this will help you make smart choices throughout life’s major milestones.
Avoid Unnecessary Debt
Young adulthood comes with a lot of big, exciting purchases. Unfortunately, that means it also comes with debt. Student loans, car or house payments, and major credit card purchases can create bills that add up and drain your budget quickly. That’s why one of the wisest tips for managing money in your 20s is to be smart about the kinds of debts you take on in your life. While some loans are necessary, you can avoid others with a little planning and care. If you open a credit card, only spend what you know you can pay off. If you take out a loan for major purchases, carefully research your options and only borrow what you need. Being smart about loans and paying off debts on a monthly basis will also improve your credit score, which will in turn make it easier for you to apply for loans and get better interest rates in the future.