Depending on your situation, when you’re in your 20s, certain milestones such as buying a home, starting a family, or even planning for retirement may seem far off. However, even if you’re not necessarily approaching any of these events soon, you still want to plan ahead to ensure long-term success. Here are a few money moves to make in your 20s to promote financial stability in your 30s and far beyond.

Be Diligent About Budgeting

Becoming more independent also comes with added responsibilities, both personally and financially, as you start your career. It is essential to manage your finances to put your money to good use. Your budget will help you understand how you spend your money versus what money you have coming in. Don’t forget to track things like subscription services, memberships, ordering takeout frequently, and more. These things add up over time, so finding ways to cut spending in unnecessary areas will help in the long run. The more detailed you are about every little thing you spend, the more helpful your budget will be and the greater your success.

One thing that can be difficult when setting a budget is balancing when certain monthly obligations are due at different times and are all paid in different ways. Your budget will save you time and money in getting organized financially. Budgeting apps and tools can make it quicker and easier to understand how you spend your money, reduce the chance of missing a bill, and put you more in control of your finances. Having a good grasp on your budget will put you ahead for years to come. 

Control Credit Card Usage

Once you start to have a steady income and take on more monthly obligations, you are likely to see advertisements for credit cards all over the place. While there are usually enticing offers associated with signing up for a new card, make sure to be very careful about how and when you use credit cards. There are definitely benefits of opening up a credit card, such as building your credit score, cashback options, or amassing points to save up for extra purchases you want to make later. However, it can be easy to fall into the trap of putting purchases on the card and then not paying them off entirely at the end of the month. 

Keeping a balance on your credit card can be a slippery slope, especially considering that credit cards have both high-interest rates and compound interest. While high-interest can be dangerous in itself, compounded interest is essentially interest on top of the interest you are already paying for purchases that you did not pay off during the monthly billing cycle. Because of compound interest, once you start to carry a balance on your credit card, paying it down can be an uphill battle if you’re not extremely diligent about paying the balance off each month. That is why it’s so essential to control credit card usage before it becomes a problem.

Ensure You’re Adequately Protected

When you first venture out on your own, you are probably trying to find ways to cut down on your monthly expenditures rather than add to them, which is why purchasing insurance can sometimes seem like a daunting task. However, carrying the appropriate insurance policies protects your future in the long run by ensuring that you don’t have to come up with a large amount of money in an unexpected event and protect you from legal challenges as well.

One insurance to consider is home insurance, or renter’s insurance coverage, even if your landlord does not require it. Home or renter’s insurance covers your personal belongings in the event of a fire, theft, or natural disasters while also providing liability coverage if someone became injured in your home or rental unit. We understand that it may seem like just another unwanted expense, but before you dismiss insurance, consider that you are paying for peace of mind. You wouldn’t need to come up with a large sum of money to replace your belongings or pay for someone else’s incurred medical bills. 

Another worthwhile insurance policy to look into, especially if you have dependents or loved ones that rely on some or all of your income, is life insurance. Life insurance provides your designated beneficiaries with a sum of money if you were to pass away unexpectedly. Life insurance coverage is determined based on various factors, including marital status, health conditions, coverage amount, and age. Even if you don’t have dependents or assets currently, it is worth looking into securing a term life insurance policy earlier in your life. You have a higher chance of locking in a less expensive premium when you are younger and in better health. This sets you up for success as you get older because not only will you have some coverage later in life, but you will be paying less for it each month.

Prioritize Saving

When you are financially preparing for the future, ensuring building up a savings fund is essential. Life is filled with unexpected curveballs, and even if you are a savvy planner, there are some events that you can’t predict. Unfortunately, job loss, relocation, car or home repairs, and medical bills are all situations that can occur without warning, so finding ways to be prepared for the costs associated with these events is a smart money move to make in your twenties.

Set aside a savings account separate from your regular bank accounts and contribute regularly. You want to pay yourself first each paycheck and act as though the money isn’t there. It can be challenging to get into this mindset, but you will be thankful that you have an emergency fund set aside for those occasions when you face an unexpected cost. You won’t have to worry about putting it on a credit card or borrowing funds from a friend or family member. We suggest setting up an automatic transfer directly from your paycheck to your savings account so that you are automatically saving and can budget accordingly.

Contribute to Your Retirement

While retirement is probably far off, it is never too early to start thinking about ways to plan for your future. Depending on your particular circumstances, you might be able to contribute to your retirement through your employer directly. If you have the option to contribute to a retirement account, take advantage of this opportunity, especially if your employer will match some or all of your contributions.

 If your employer does match your contribution, these are additional funds that you will be thankful for when you start approaching retirement age. Evaluate your investment options as well. When you invest at a younger age, you can consider a more risky strategy that might yield higher returns. Remember that any investment comes with a risk, so it is always best to consult with a financial professional before determining an investment strategy.

Find Ways to Create Passive Income

Even though you might have just started your career and are still working on honing your skills, something to consider when you are in your twenties is finding ways to earn passive income that can help you build wealth in your 30s and beyond. While it can be a bit of an effort on your part to determine ways to create a passive income, you will reap the benefits once it is there, and sometimes you can even turn your side hustle into a full-time gig. 

To determine the best path for you, consider both the things you are good at and the things you enjoy when looking into ways to earn passive income. You might need some capital as well, so consider that when planning. At first, you might not be making a lot, building upon your passive income stream is beneficial to do in your 20s so that when you are in your 30s, you can start to see the results from your efforts.

Set Short and Long-Term Goals

Last but not least, when you are planning for the future, it can help set both short and long-term goals to keep you on track. Planning for bigger picture financial milestones such as purchasing a home, planning for retirement, or saving for a big purchase can be overwhelming. That is why starting small can be beneficial while helping you to feel accomplished when you reach a particular short-term goal. 

For example, consider making it a goal to pay off one of your credit cards rather than trying to pay off all debts. Paying off one of your credit cards will get you motivated to start saving or paying down even more debts and set you up in a good routine. It is always helpful to have a 5-year plan in mind but start by setting short-term, attainable goals to help you reach that point without feeling discouraged and overwhelmed. 

During your 20s, remember the importance of securing good financial habits to set yourself up for success in the years to come. Even though this is a time filled with trial and error, finding ways to learn from potential financial mistakes you have made and make improvements is vital. By making some of these smart money moves now, you will lay a strong financial foundation to build upon in your future. Happy Budgeting!