Managing your finances in your 20s is something that can be rather difficult. You question whether you want to make the most of your income and spend it on nice clothes and holidays. The other half of you want to start saving your money for the long-term and short-term future. 

Remember To Pay With Cash and Credit

One of the first and most important things you can do in your 20s is to pay with your debit card. So, before you buy anything, we recommend you save your money until you can afford to pay it off. 

The reason why you must do this is that credit cards have interest rates. Unless you are certain you can afford the interest on top of the expenditure, there is no reason to use your credit card. If you can afford to pay it off then great. You can then build a good credit score for future expenses. 

Take Time To Educate Yourself

Another thing we advise is that you start to educate yourself on ways to save and spend money. Many people didn’t grow up with parents who educated them to save money. Therefore, they haven’t got the skills that those who are educated on saving money. That is why you need to start learning how to do it yourself. 

There are many books where you can learn how to budget your money and invest it. Furthermore, there are several podcasts dedicated to personal finance so it may be worth listening to this on your way to work. However, we advise you to not follow the guidelines of the average person. Instead, read up on people such as Benjamin Graham, Warren Buffet, Dave Ramsey, Suze Orman and many more. All these people have made a lot of money and are people you should aspire to be like. 

Learn To Budget

Learning to budget is another essential skill you must know in your 20s. In your teens, money is something you do not need to worry about until afterwards. However, once you have reached your 20s, it is time to get out of those bad spending habits. Start saving for the things that matter most and for the long-term future. 

A good way to budget your money is the 50/30/20 rule. It is something several personal finance experts suggest when it comes to budgeting. If you are unsure about this rule, this is where you will use 50% of your income on the bills, rent/mortgage, fuel for your car and other expenses you must pay each month. The 30% is for things you enjoy like restaurants, social events, new clothes etc. Finally, 20% is the money you will put into a savings account. Once you master this rule, you will start to worry about money less and enjoy things you already have. 

Create An Emergency Fund

Although this may seem over the top, an emergency fund is a great way to have yourself covered if any unexpected bills occur. It could be things like your washing machine or car breaking down and requiring a new part. 

As we said, this may seem a little extreme and only something you need to worry about when you own a car and a house. If you don’t want to put money into an emergency account, use your savings account as your emergency fund. 

Start Saving For Your Retirement

Another thing you need to start doing is saving for retirement. As the age for your state pension continues to increase, the more you need to start saving for an “early” retirement. Putting money away each year towards your retirement is something you will thank yourself for later on in life. Plus, with the interest rates, you get additional money that you technically did not put away yourself. Furthermore, the earlier you start with this retirement pot, the more money you will have in your later years. 

Start Investing In Stocks 

Two types of people save their money. Some people put their money into a savings account and others use the money to invest in the stock market. The reason why they invest in the stock market is that this will likely increase more than their savings account. 

Currently, the interest rate of an average savings account is 3.69%. However, with the stock market, people can earn a lot more than this. The only issue is they can also lose that money much more quickly. Whereas with a savings account, you are less likely to lose that money if it is with the FCA. 

Starting A Passive Income

It is another great way to build up funds and requires little effort. Many people are not looking at other avenues to earn more money and one of them is through passive income. There are many different ways you can start to earn extra money as well. Some people will want to get onto the property ladder as the value of real estate continues to increase over time. Other people prefer to invest in the stock market as the value of companies can also increase over time. Other people would rather go down the hospitality route, renting out a property or room in their home for people on holiday. The simple way to do this is to put money away into a savings account.

As you can see, there are many different ways to earn a passive income and they all require you to put money into them. Nonetheless, they are a great way to gain extra money over time and benefit you in the long run. 

What To Do If You Ever Get In Financial Trouble? 

Getting into debt cannot be helped sometimes. All it needs is an unexpected fee that costs you a lot of money and knocks you off your budget plan. If this fee costs more than your savings account, you don’t have an emergency fund. It can be overwhelming. It is one of the main reasons you should have an emergency fund on top of your savings account. 

If your debt becomes too much, it may be time to seek financial assistance. Speak to the people who you are in debt to see if you can come to some arrangement. Another thing you can do is use an IVA calculator. These are good because you can write off any unaffordable debt and arrange a new monthly payment which is more affordable for your lifestyle.