One of the most common questions I get asked is, “Am I making the right money moves for my age?” It makes me super happy that you are thinking about that and worried about it. I’ll be honest, when I was in my early 20’s, I wasn’t thinking about “am I making the right money moves.”
There are so many things you are probably battling like:
- Student loan debt that seems like it will never end
- Frustrated over how you can pay off debt and still save money
- You know you should start contributing to your 401(k), IRA or ROTH…but you have so many questions
- Maybe you can’t seem to counteract a past money mishap you made
- You can’t seem to get your budget to work out each moth, so why bother
Hey, I’ve been there, I get it.
I’ve made so many not so great money decisions, but the difference is that as a Certified Financial Planner, I know how to recover from those mishaps. That’s what I want to teach you and empower you with the skills to do the same. I want you to be really comfy with your money so that you KNOW you can overcome any situation.
Whatever steps you take now will help you smooth sail your way into your 30’s. Keep these up year after year and you will be miles ahead of your friends that don’t think that managing their money is “important” to their future.
Money Move #1- Your Budget
Master your budget. Seriously! This is the smartest money move you can make in your 20’s to set yourself up for the future. Budgeting doesn’t have to be dull and boring…or scary. Think of it as a tool that you can use to achieve all the goals that you want to.
- Maybe you want to travel and see the world….BAM your budget can help you get there!
- Maybe you want to start your own business….BAM your budget can you get there!
- Maybe you want to pay off debt – FAST-….BAM your budget can help you get there!
Why is budgeting SO Important?
Your budget is your roadmap. It tells you where you are going and how you are going to get there. Your goals and your budget are as good of a combo as mac and cheese. Your goals give you direction and your budget gives your goals an action plan to meet them. If you can master your budget in your 20’s, you’re future self is really going to thank you.
Check out my video on How to Budget in 20 Min a Month
Budgeting has helped me so many times. In the good times, it’s helped me achieve so many goals, and in the bad times (which you know there will be), my budget has saved me from going into more debt.
What should your budget look like?
I suggest a system that works really well called the 50-20-30 budget. This is a great system to organize your budget around if you are having trouble figuring out how much to budget for each item.
Here’s how it works-
50% of your take home pay goes towards your fixed expenses (think rent, mortgage, car payment, student loan payment, min payment for credit cards, groceries, etc.)
20% of your take home pay goes towards your savings (building your Emergency Fund, contributions for your retirement accounts, saving for goals)
30% of your take home pay goes towards your funsies (think variable expenses like eating out, shopping, entertainment, UBER rides, travel, etc.)
I’ve got an awesome free course, Jedi Mind Trick Your Budget, that will teach you my tips and tricks to get your budget jumpstarted. The course is a 7-Day course and I promise I’m bringing loads of good info plus a couple of free worksheets. Sign up by clicking on the image below!
Here’s a link to some of my favorite podcasts on Budgeting:
Money Move #2- Your Credit Score:
It’s always a good time to get your free annual credit report, especially if you have no idea what your credit score is (if that’s you, don’t panic, it’s ok).
Although you might not have a lot of debt, it’s important to check your credit annually and get in the habit of doing so. Not only will you be checking this one-off your list, but you will also learn first hand how your credit is reported, and get cozy with that all important three-digit number known as your credit score. This is one three-digit combination where the higher number wins.
You’re looking for a 740+ credit score to get the very best interest rates on things like cars, credit cards and loans. If you don’t have a score that high, it’s time to start working on an action plan to raise it up. Good credit will save you THOUSANDS AND THOUSANDS of dollars over your lifetime.
Some of favorite resources for checking your credit are:
Money Move #3- Your Credit Cards:
Should you have a credit card?
My answer is YES!
Credit cards help you:
- Build a solid credit score
- Score awesome freebies like free plan flights and hotel stays
- A great help in emergencies when you need extra money right away
Do credit cards get a bad wrap – YES. I understand if it’s hard for you to have a credit card. You don’t want to get into any more debt and you hate the idea of having one. However, if you use a credit card wisely, it can be another great tool for you financially.
You should always be getting something for the money you are spending. Points, cash back or discounts are the common form of “something back” with credit cards. Some great credit card suggestions are the Discover It Card and Chase Sapphire Preferred (I love this card). Both offer rewards and cash back that you can use on all sorts of things.
Here’s a smart money tip: you should put all your monthly expenses on the credit card and then pay it off each month. Not only will be scoring some major points, but you will also be building a better credit score. Interest is your worst nightmare, so never keep more of a balance than you can pay off. Let’s not make the credit card companies richer – let’s make you richer.
Money Move #4- Your Investing:
I never suggest stock market investing in your 20’s. It’s like tossing the dice in Las Vegas on a craps game- sometimes you win, but most times you don’t.
You need to learn the foundation elements first. Practice makes “perfect” in the game of investing.
A cool company called Sprinklebit offers an extensive FREE online Investment University and $5,000 free Sprinklebucks to mock invest. See whether you have the stomach to handle investment gains and losses before you play in the big leagues.
Another company I like is Gold Bean where you can invest in what you know and learn along the way.
You don’t need to pay a financial planner to invest your money either in retirement accounts. With companies like Betterment and Wealthfront, you can create a diversified portfolio for a fraction of the price. I’m talking dollars a month to create a portfolio that would cost you hundreds, if not thousands elsewhere. The best part is these are both online companies built for millennials.
Money Move #5 – Your High-Yield Savings:
Say bye-bye to miserably low brick and mortar savings interest rates and say hello to high-yield savings accounts. This one is a no-brainer.
If you earn .01% interest with your traditional bank savings account, but can earn 1.00% interest with an online bank, wouldn’t you make the switch right away?
If you’re reading this and thinking, “Wait, I don’t know how much (or little) interest I’m actually getting,” then you need to do a little investigation right now.
Your motto for life needs to be – save, save, save – and save with a reliable bank that is going to offer you the best interest rate possible. The best places to look are Ally Bank and Capital One 360.
Money Move #6- Your Student Loans:
Student loan payments are the worst, and rates are all over the place…and it’s gotten WAY out of control. The average person has well over $30,000 in student loan debt (and that’s even the low side). So what do you do with all this debt?
Refinance is a good option, with a few caveats.
There are so many options now for refinancing your student loans, and even government programs like the student loan forgiveness program.
SoFi is a leader in alternative student loan refinancing and offers great rates and options for students. They have a special offer where you get $100 bonus if you decide to refinance with them. The best news is you can go through the entire process, find out what your new rate and terms would be BEFORE you have to say yes to the refinance. So it’s a no-loose situation.
They even have an entrepreneur program geared towards those biz lovers who are starting their own business. Make sure you do your research before you refinance and know what your options are.
The best way to score the best deal goes back to point #1 – have a solid credit score and the world will reward you. See how full circle money is?
Money Move #7- Know Your Numbers
Actually, this should probably be money move #1. It goes hand in hand with your budget, but it speaks to all the other money moves as well.
Knowing your numbers means that you know EXACTLY how much you are spending on everything to the dime.
*All your monthly expenses
*Interest rates for cars, credit cards, student loans
This process is never a fun one to undertake, but it’s a super important one. Often what I suggest is the following action plan.
Step 1- Grab a beverage and a snack and on a scratch piece of paper take a guess as to how much money you’ve spent last month in the following categories:
Groceries, eating out, credit card payments, entertainment, travel, shopping and personal care
Step 2- Print off your most recent bank statement (or the account you use to pay for your expenses)
Step 3- Grab some colorful highlighters
Step 4- Separate ALL your expenses into categories ( hint, they should match the ones on your budget). There’s no right or wrong here but EVERY cent needs a home in a category
Step 5- Add all the categories up
Step 6- Take a look and see how closely you were to your guess (and make changes as necessary to set some goals around your spending and saving)
I’ve also got a handy guide below to help you Get Yo’ Money in Check (see below). Download it now below to find out how you stack up, and use it as a resource guide along with these steps to master the smart money moves in your 20’s.
*Affiliate links used, however I never recommend any company if I’m not a firm believer in their products and services.