Learning how to manage money in your 20s is one of the best skills you can learn as a young adult. This is a skill that will provide benefit for the rest of your life and you will be grateful you took the time to sort your finances out early in life.
In this post I will be sharing 3 easy but SUPER IMPORTANT tips for managing money in your 20s.
Getting started on saving for your emergency fund early will help alleviate financial stress in the long run.
An emergency fund is just that… a fund set aside specifically for emergencies. This is typically used for medical emergencies, unemployment, unexpected home or car repairs etc.
The rule of thumb is you want to start with $1,000 and work your way up to saving 3-6 months worth of expenses. Note I said “expenses” not your entire monthly income.
Pro tip: Have your emergency fund at a different bank, not connected to your daily debit card. This way you aren’t as tempted to use it for every minor inconvenience.
Create a Budget
Budgeting is basically organizing your money. This is the only effective way to plan out your finances and keep track of where your money is going.
The basic components of a budget is total income and total expenses. I recommend starting out by budgeting in line with your paychecks (weekly, biweekly, monthly). You also don’t want to forget to add in savings to your budget.
For more info on budgets don’t forget to subscribe so you don’t miss future finance posts.
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Pro Tip: Use cash for things like food to ensure you stick to your allocated budget. It’s soooo easy to over spend when you are swiping your cards.
See links below to the binder and envelopes I use for my cash budgets and sinking funds.
Automate your Savings
I cannot stress the importance of PAYING YOURSELF FIRST! And automating this will make saving so much easier and effortless.
Once you complete your budget and have calculated a realistic saving’s goal your next steps are to:
- Create a separate account for your savings. Ideally an account that yields high interest.
- Set up automatic transfers from your checking/main account to your new savings account.
Those are key steps to set yourself up for success, when it comes to saving and managing money in your 20s.
Managing money can be difficult at any age but implementing the tips above will make it a less stressful experience. Props to you for wanting to learn how to manage money in your 20’s and taking action by clicking on this post. That is the first step to building better money habits.
For more money tips check out these posts: