Every Finance Move You Should Make in Your 20s

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Building a strong financial foundation in your 20s is crucial.

Many young adults struggle with managing student loans, building an emergency fund, and just figuring out where to start.

By setting clear financial goals now, you can reduce stress and set yourself up for success later on.

Using SMARTER goals—Specific, Measurable, Achievable, Relevant, Time-bound, Evaluate & Emotions, and Reward & Revise—is an effective way to ensure your financial planning stays on track.

Research shows that people who set specific financial goals are more likely to save and invest successfully.

Source: Savology

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For example, a recent study found that individuals who set clear, actionable savings goals were able to double their emergency fund in just one year. 💰

So, whether it’s paying off high-interest debt or saving for a vacation, having a plan makes all the difference.

1. Build an Emergency Fund

Why an Emergency Fund is Essential

An emergency fund is your financial safety net.

Life is unpredictable, and unexpected expenses pop up, like car repairs or medical bills.

When the unexpected (that you low key expected) finally happens 😭

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When these costs arise, having an emergency fund means you won’t have to rely on credit cards, which can lead to high-interest debt.

No one wants to deal with that stress, especially when you’re just trying to get your life together.

This fund isn’t just about avoiding debt; it’s about peace of mind. 🧘🏿

Knowing you have money set aside for emergencies can help you feel more secure in your financial journey.

It’s a crucial step in your overall financial health, allowing you to focus on long-term goals without the constant worry of unforeseen expenses.

How to Start Building Your Emergency Fund

Specific:

Aim to save 3-4 months’ worth of living expenses, giving you a solid buffer.

Measurable:

Contribute $250 monthly.

This may sound daunting, but consider automating transfers to a separate savings account.

It’s a smart way to ensure you’re consistently saving without thinking about it.

Achievable:

Adjust your contributions based on your monthly expenses and income.

If you can’t hit $250 right away, that’s okay.

Start small and gradually increase your contributions as you find extra cash in your budget.

Relevant:

This fund provides peace of mind and financial stability.

It’s not just about numbers; it’s about creating a solid foundation for your future.

Time-bound:

Set a goal to reach the $3,000 mark within 12 months.

Having a timeline will keep you motivated and focused on your savings.

Remember, every dollar counts, and the sooner you start, the more secure you’ll feel!

Evaluation and Emotions:

Check your progress every 3 months. Are you on track?

Adjust if needed and note how building this fund impacts your confidence and stress levels.

Reward and Revise:

Once you hit your first savings milestone, treat yourself to something small—like your favorite meal.

If your income changes, revise your savings goal to reflect your new situation.

2. Pay Off High-Interest Debt

Why Prioritize High-Interest Debt

High-interest debt is like a sneaky thief—it chips away at your financial health without you even noticing. Credit cards are notorious for this, with interest rates that can skyrocket if you’re not careful.

If you’re only making minimum payments, it can feel like you’re stuck in a never-ending cycle. 💸

That’s why tackling high-interest debt should be a top priority. It’s not just about paying off a balance; it’s about freeing yourself from a burden that could hold you back from reaching your financial goals.

The impact goes beyond your wallet, too.

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Carrying high-interest debt can hurt your credit score and limit your ability to take advantage of lower interest rates on things like car loans or a mortgage.

Taking control of this debt is the first step toward financial stability and a better credit history.

Best Way to Tackle High-Interest Debt

Specific:

Start with a clear target: pay off $2,500 in credit card debt.

Knowing the exact amount you want to eliminate helps you focus your efforts and track your progress.

Measurable:

Allocate an extra $150 each month toward this debt.

This way, you’re paying more than the minimum and making real progress.

If $150 seems like a stretch, start lower and work your way up as you get more comfortable with your budget.

Achievable:

Choose a debt repayment strategy that fits your situation.

The snowball method focuses on paying off smaller debts first to build momentum, while the avalanche method first targets the highest interest rate to save more in the long run.

Pick the one that feels most doable for you and stick with it.

Relevant:

Reducing your high-interest debt will lower your monthly expenses and improve your credit score over time.

This means more money in your pocket and better financial opportunities down the road.

Time-bound:

Aim to eliminate this debt within 18 months. Having a timeline keeps you accountable and motivated.

Remember, every extra dollar you put toward this debt is a step closer to financial freedom!

Evaluation and Emotions:

Check your progress every three months.

If you've paid off $500 or more, that’s a great start! If you’re falling behind, maybe cut back on dining out or subscriptions to free up more cash.

Reward and Revise:

Celebrate hitting milestones. When you pay off your first $1,000, reward yourself with a weekend getaway—but make sure you use cash or a debit card, not a credit card.

If you get a bonus or raise at work, consider increasing your monthly debt payments.

Conversely, if your income takes a hit, revise your plan to something more manageable without giving up on the goal.

3. Invest for Retirement

Why Start Investing Early

When it comes to retirement, starting early is like planting a tree—the sooner you start, the bigger it grows. 🌱

Investing in your 20s means you can take full advantage of compound interest, which is like earning interest on your interest.

Even small contributions now can grow significantly over time, setting you up for long-term financial security.

Waiting too long to invest can mean missing out on thousands of dollars in potential growth. So, it’s not about how much you can invest right now; it’s about starting and building momentum.

Plus, early investing isn’t just about retirement savings—it’s about creating financial options for your future self.

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Want to travel? Start a business? Retire early? Getting a head start on investing can help make those dreams a reality.

Setting Up a Roth IRA or Other Retirement Plan

Specific:

Contribute $100 monthly to a Roth IRA.

This type of account offers tax-free growth, meaning your investments can build up over time without Uncle Sam taking a cut when you retire.

Starting with $100 is manageable; as you get more comfortable, you can increase that amount.

Measurable:

Increase contributions by $50 annually.

This gradual increase won’t feel like a big hit to your wallet, but it makes a huge difference over the years.

Think of it as a small but mighty step toward your future.

Achievable:

Automate transfers to your investment account.

Set it and forget it! This way, you don’t have to remember to move money each month and are less tempted to spend it on things that don’t align with your goals.

Relevant:

Investing for retirement is one of the smartest financial moves you can make.

It helps build wealth over time, prepares you for a comfortable retirement, and gives you peace of mind knowing you’re securing your future.

Time-bound:

Contribute a total of $1,200 by year-end.

Having a clear target helps keep you on track.

Every dollar you invest now is a dollar that can grow and multiply over time, getting you closer to a financially stress-free future.

Evaluation and Emotions:

Evaluate your progress every six months.

Have you increased your contributions? How does it feel knowing you’re investing in your future?

If you feel motivated, try adding an extra $25 a month. If you’re feeling overwhelmed, review your budget and see where you can adjust.

Reward and Revise:

Celebrate when you hit the $1,200 mark with something small—maybe dinner out with friends. Just make sure it fits your budget.

If you get a raise at work, use part of that to bump up your monthly contribution by $25 to $50.

If life changes, adjust your contributions, but keep going.

4. Create a Budget and Stick to It

The Foundation of Good Money Management

Creating a budget is like building a roadmap for your money. 🧭

It tells you where every dollar should go and ensures you use your cash to reach your financial goals.

Without a budget, it’s easy to spend impulsively and wonder where your money went at the end of the month.

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By understanding exactly where your money goes, you’re taking control of your financial future and setting yourself up for success.

It’s not about restricting yourself; it’s about intentionally aligning your spending with your priorities.

Think of it this way: A budget is the foundation of good money management.

Once you’ve got it in place, you can start building everything else—saving, investing, and growing wealth—on top of it.

Developing and Maintaining a Budget

Specific:

Track every expense and categorize spending (e.g., rent, groceries, entertainment).

This means writing down everything—yes, even that $3 coffee.

Once you see where your money is going, you can start making choices that support your goals.

Measurable:

‍Reduce non-essential spending by 10%.

That might mean fewer takeout dinners or skipping a few shopping sprees.

It’s all about finding areas to cut back without feeling deprived.

This small adjustment can free up cash for savings or paying off debt faster.

Achievable:

Use budgeting tools like apps or spreadsheets.

Apps like Mint or YNAB make tracking your spending in real-time easy, while a simple spreadsheet can work just as well.

Choose what fits your style and commit to updating it regularly.

Relevant:

A budget helps you control your finances, save more, and work toward your goals.

Whether you’re saving for a vacation, building an emergency fund, or paying off debt, budgeting helps make those dreams a reality.

It’s your game plan for managing money like a pro.

Time-bound:

Establish a sustainable budget within 3 months and review it monthly.

Start by tracking expenses for a few weeks, then adjust based on what you see.

Check in monthly to see how you’re doing and make tweaks as needed.

This way, your budget grows with you and continues to support your goals.

Evaluation and Emotions:

Check in every month.

How do you feel about your spending habits? Are you stressed or proud of the progress?

If something feels off, adjust your budget to reflect changes in your life or spending priorities.

Reward and Revise:

Celebrate small wins—like successfully reducing takeout spending for two months—by treating yourself to something budget-friendly, like a day out.

If you find your budget is too strict, revise it by allowing a little more for the areas that bring you joy, as long as it doesn’t derail your overall goals.

5. Increase Your Income

Diversify Your Income Streams

Relying solely on your 9-to-5 paycheck can feel limiting, especially when unexpected expenses pop up, or you want to fast-track your savings.

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That’s where diversifying your income streams comes in.

Finding ways to make extra money isn’t just about padding your wallet; it’s a game-changer for achieving your financial goals faster.

Whether you’re paying off debt or building an emergency fund, every extra dollar counts.

Sure, it’s easier said than done, but the fact remains: Extra income can fast-track debt repayment and savings goals. ✅

Even small streams of income, like selling items you no longer use or taking up a side gig, can make a big difference over time.

Exploring Side Hustles and Part-Time Work

Specific:

Aim to earn an additional $200 monthly through a side hustle.

This could mean anything from freelancing in your field of expertise to driving for a rideshare service.

The key is picking something that fits your schedule and leverages your skills or interests.

Measurable:

Identify a side gig, such as freelancing or part-time work.

Start by listing what you enjoy doing or skills you have that others might pay for.

Then, find opportunities that align with your list.

Platforms like Upwork or Fiverr can help you get started.

Achievable:

Commit 5-10 hours a week to this side hustle.

Consistency is key.

Even if it’s just a few hours on the weekend, dedicating regular time to your side hustle will help you see steady progress.

Plus, it prevents burnout by keeping your schedule manageable.

Relevant:

Achieve financial goals faster and build additional skills.

Side hustles aren’t just about money—they’re a chance to learn new things, expand your network, and maybe even discover a new passion.

Plus, more income means reaching your financial goals quicker, whether that’s paying off debt or saving for a dream vacation.

Time-bound:

Start earning within 6 months.

Set up a timeline for yourself: research in the first month, apply for gigs in the second, and aim to earn consistently by the third month.

That way, you have a clear path to follow and can track your progress as you go.

Evaluation and Emotions:

Evaluate progress every 3 months.

Are you excited about your side hustle, or is it becoming draining?

If you feel overwhelmed, try scaling back the hours or exploring another income stream that better fits your interests and schedule.

Reward and Revise:

Celebrate each milestone—like landing your first gig—by treating yourself to something meaningful.

If the income isn’t what you expected, revise your approach by researching more lucrative gigs or diversifying your sources of income.

6. Start a Vacation Fund

Why a Vacation Fund is a Good Idea

We all need a break sometimes, and let’s be honest—you’re probably going to take that trip whether your wallet is ready or not.

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Instead of relying on high-interest credit cards to cover your getaway, why not plan ahead and save for it? 🤨

A vacation fund ensures you can enjoy your time off without worrying about debt later.

By putting money aside specifically for travel, you get to experience guilt-free relaxation, knowing you’re not sacrificing your financial stability.

Saving for a Guilt-Free Getaway

Specific:

Save $1,000 for a future trip.

Whether it’s a weekend road trip or a week at the beach, having a set amount to save will keep you focused.

Knowing exactly what you’re saving for makes it easier to stick to your plan.

Measurable:

Set aside $50 per paycheck. This approach makes your goal feel more manageable.

Every payday, transfer $50 into your vacation fund automatically.

That way, saving for your dream trip becomes just another part of your routine.

Achievable:

Cut back on dining out or cancel unused subscriptions.

A few small changes can add up.

Cooking at home a few extra times a week or ditching that streaming service you barely use can free up enough cash to contribute to your vacation fund without making you feel deprived.

Relevant:

A reward for financial discipline and sticking to your goals.

Saving for a trip isn’t just about the destination; it’s about proving to yourself that you can plan, save, and achieve a goal.

Plus, you’ll enjoy your vacation even more, knowing it’s fully paid for.

Time-bound:

Save the full amount in 10 months.

Breaking your goal down into smaller, more manageable steps makes it feel a lot less daunting.

And with each passing month, you’ll be closer to that well-deserved getaway—no stress, no debt, just you and your destination.

Evaluation and Emotions:

Check your progress every few months.

How does saving for this trip make you feel—excited or stressed?

If the process feels restrictive, tweak your budget to allow for more flexibility so the journey to your vacation feels just as enjoyable as the destination.

Reward and Revise:

Celebrate milestones like reaching $500 by treating yourself to something similar, like a day trip.

If you fall behind, revise your approach by increasing contributions temporarily or extending your timeline to avoid stress.

7. Invest in Personal Development

Investing in Yourself Pays Off

Investing in yourself is one of the best moves you can make.

To that one friend who keeps planning trips while I’m trying to save for a certification—yeah, you know who you are. 😒

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It’s like planting seeds for future success. Boosting your skills not only enhances your career prospects but also opens the door to higher earning potential.

Whether it’s learning a new language, mastering software, or getting certified in your field, every bit of knowledge you gain adds value to your career.

Plus, it shows future employers or clients that you’re serious about your growth.

Pursuing Courses or Certifications

Specific:

Allocate $500 for career-related courses or certifications.

This dedicated budget ensures you’re making consistent progress without overextending yourself.

Choose courses that align with your career goals, whether it’s project management, coding, or communication skills.

Measurable:

Complete one course every 3-6 months.

This pace allows you to absorb and apply what you learn without feeling overwhelmed.

As you progress through each course, track your milestones.

This will help keep you motivated and show how much closer you are to your goals.

Achievable:

Research affordable online courses that fit your budget.

Platforms like Coursera or LinkedIn Learning offer great options without breaking the bank.

Look for courses with good reviews and flexible schedules that fit your lifestyle.

Relevant:

Improves skills and knowledge, boosting career growth.

Focusing on areas that directly impact your career ensures your investment in personal development pays off.

Each new skill makes you a more attractive candidate and can help you climb the career ladder faster.

Time-bound:

Complete two certifications within 12 months.

Setting a timeline keeps you accountable and focused.

By the end of the year, you’ll have new certifications to your name and a stronger sense of accomplishment and confidence in your abilities.

Evaluation and Emotions:

Check in on your progress after each module or course.

Reflect on how the process is impacting your mood and motivation.

Are you feeling excited about the knowledge you're gaining, or is the course feeling overwhelming?

Adjust your workload or schedule if needed to maintain a healthy balance.

Reward and Revise:

Reward yourself when you finish a course—maybe treat yourself to a relaxing weekend or a special item you’ve been eyeing.

If a course doesn’t provide the value you expected, revise your future course selections to focus on areas that offer more direct benefits to your career.

8. Plan for Big Purchases

Preparing for Major Financial Decisions

When it comes to making big purchases—like buying a car or putting a down payment on a home—preparation is key.

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Planning ahead helps you avoid high-interest debt, which can cost you much more in the long run. Instead of relying on credit cards or loans, start saving now.

That way, when the time comes, you can confidently make these major financial decisions, knowing you’re not adding to your debt.

Setting Short- and Long-Term Goals for Major Expenses

Short-Term Goal: Save for a down payment on a new car.

Break it down into manageable chunks.

For example, if you’re aiming for a $3,000 down payment, set aside $250 a month over the next year.

This approach makes the goal feel more attainable and keeps you motivated.

Long-Term Goal: Plan and save for a home down payment.

This is a bigger commitment, so it’s important to be patient and strategic.

Start by figuring out how much you need based on the price range of homes in your area.

Then, decide on a monthly savings amount and set up automatic transfers to a dedicated savings account.

This ensures your money grows without the temptation to spend it on other things.

With consistent saving, you’ll be closer to homeownership before you know it.

9. Build and Maintain a Good Credit Score

Why Credit Matters

Your credit score isn’t just a number—it’s your financial reputation.

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It impacts everything from loan approval and interest rates to your ability to rent an apartment or even get certain jobs.

A good credit score can save you thousands of dollars in interest over your lifetime and open doors to better financial opportunities.

Prioritizing your credit health now will pay off in the long run. 💳

Improving and Monitoring Your Credit Score

Building a good credit score doesn’t happen overnight, but it’s doable with consistent effort. Start by paying all your bills on time—late payments can seriously hurt your score.

Keep your credit card balances low; I always say that you should aim to use less than 30% of your available credit.

Also, avoid applying for too much new credit at once, as multiple inquiries can lower your score.

Monitoring your credit report is just as important as managing your credit.

Check your report regularly to spot any errors or fraudulent activity that could drag down your score.

You can get a free report once a year from each of the major credit bureaus.

Being proactive about your credit helps you stay in control and make the most of your financial opportunities.