How to Manage Your Finances in Your 20s

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If you’re in your 20s, you might think you don’t need financial tips. Either you’re making more money than you need and you feel like you should just be able to enjoy some carefree years before you have a family and more responsibility or you’re struggling to make ends meet and there’s no extra cash to do things like start a savings account.

However, in both of these extremes and anywhere in between, there’s still plenty of room to manage your finances and make some smart money moves in your 20s.

Have a Budget

It might not sound like much fun, but you really do need to know where your money is going. If you don’t have enough of it, you might be able to identify areas where you could cut back on your expenses. Maybe you could reduce your grocery bill, get a roommate, or move to a cheaper apartment.

This could free up some cash that you could get working for you. If you have enough money for what you need and then some, you could be throwing away some prime investing years by overspending. Money that you put away now could exponentially increase over the decades and leave you very financially comfortable by the time you are middle-aged or ready for retirement.

Going Back to School

You might be thinking about going back to school to get a graduate degree at some point in your 20s. This can mean a big boost for your career and earning power, but of course, it also costs money. Keep in mind that many of the same sources that you used for your undergraduate degree may be available for a graduate degree.

In fact, a student loan from a private lender may be particularly attractive for you as a graduate student since you may have built up a credit history that means you are offered very low-interest rates. You can usually check your eligibility and offers quickly online.


Start building a fund for emergencies so that you don’t have to reach for your credit card every time you encounter an unexpected expense. You should aim to have at least three to six months of savings although some people go for even more, but to start with, even just a few hundred dollars can make a big difference.

Alongside how to manage your finances, you should be socking away as much money as you can in a retirement account. Take advantage of your employer’s retirement plan, and if your employer doesn’t have one, look into starting one yourself.

Paying Off Debt

With the exception of student loans and buying a home, you should not take on any more debt. Furthermore, you should focus on paying off any existing debt aggressively. For student loans, you might be able to start paying even while you are still in school.

Again, the one exception to this is your home. Some people prefer to pay off a mortgage quickly for their peace of mind, but there may be taxes and other benefits to consider. You may want to consult a financial professional if you’re considering trying to pay off your home early to make sure you understand the pros and cons and manage your finances.

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