Your 20's should be some of the most exciting times of your life, but they're also perfect for making good financial decisions that can help your 30s be just as fun.
Your 20s will be some of the best times of your life, but it's also the perfect time to get your finances in order.
Between finishing college, establishing a career, and starting a family, you'll need to develop solid money habits that can help you with your short and long-term goals.
If you'll be reaching 30 soon, here are 10 financial moves you'll want to consider making.
1. Pay off debt
Debt can hold you back from doing many things with your money. When it comes to high-interest debt, you also lose a ton of money by making payments that go toward interest, so it's best to pay off that debt sooner rather than later.
Try to pay off your student loan(s) and consumer debt in your 20s so you won't have to worry about it in your 30s.
2. Avoid getting into credit card debt
While it's important to pay off the debt you have in your 20s, it's also important to make sure you don't accumulate any more debt as a result of lifestyle inflation.
After you graduate college and find work, your income will most likely increase which can tempt you to buy more than you need. Often times, this can actually lead to spending more than you earn and getting into credit card debt.
Credit cards are a great way to build your credit when used properly. If you're going to use a credit card, make sure you keep your total utilization below 30 percent of your limit at all times and pay your bill off in full each month to avoid getting into debt.
3. Create an emergency fund
Unexpected expenses will pop up more and more as you get older and busier. It's best to prepare yourself for unexpected costs by creating an emergency fund.
How much you need to save depends on your preferences and situation, but just make sure you save an amount that you can feel comfortable with.
Prioritize your savings by setting up automatic transfers each time you get paid to increase the balance of your account.
4. Start saving for retirement
You can start saving for retirement at any time, but it's best to start when you're young. The younger you start saving, the more time you'll allow compound interest to grow your nest egg so you can retire comfortably.
You can start saving for retirement by contributing to your employer-sponsored 401(k) plan -- especially if they offer to match your contributions because that's basically free money added to your account.
You can also open an individual retirement account (Roth IRA) if you don't have access to a 401(k). Your goal should be to max your retirement account(s) out every year.
5. Get insured
Bypassing insurance can be a costly mistake, Even though you may not think you need it, having insurance can come in handy when an accident occurs and you're in a financial bind. Make sure you have auto and medical insurance as these are required.
If you rent or own a home, consider renter's or homeowner's insurance to protect your belongings and check out term life insurance quotes especially if you have kids or a lot of debt.
6. Adapt to living below your means
Spending every dime you make is a bad habit to get into. It can prevent you from saving up for large expenses, like a down payment on a house or traveling.
Set clear financial goals then prioritize your spending around them. You'll find living below your means in your 20s is much easier than in your 30s, so it's best to get ahead financially by adopting frugal habits early on.
7. Start investing outside of retirement
If you want to start experimenting with investing in stocks and bonds, there's no better time to start than before your 30s. That way, you'll have plenty of time to gain some experience and let your investments grow (or realize what you'll do differently in future years).
The younger you are, the more risks you can take without too much backlash.
8. Pay for your wedding in cash
If you're planning on getting married before you turn 30, try to pay for your wedding in cash as opposed to taking out a loan.
Couples who pay for their wedding in cash can focus on other financial goals right after their honeymoon instead of having to pay loans back.
Set a realistic budget for your big day and determine what is and isn't important to you. You can even start side hustling to earn extra money in preparation.
9. Set long-term money goals
Long-term money goals are important. They help you determine what you're really working towards and help you set the shorter goals you need to meet in order to get to the end result. In your 20s, it's important to figure out what you really want out of life and how you'll be able to use money as a tool to achieve it.
Your goals can change over time, but by setting realistic goals and expectations for your future, you'll be able to spend more mindfully year after year.
10. Be selfish with your money
Don't forget to be selfish with your money at times (not all the time) and spend it on things that you value. Some people want to travel before they have kids while others want to hold on to their guilty pleasures whether it's a monthly salon appointment or a gym membership.
If you value something and it makes you happy, you don't necessarily have to cut it out of your budget as long as you can afford it.
Remember
While your 20s may be filled with lots of exploration, fun, hard work, and trial and error, that doesn't mean you can't start getting your finances in order. Doing so will set you up for success, so you're not starting from the ground up once you turn 30.
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