7 Financial Tips For People In Their 20’s

Being young and starting out on your career path can be the most exciting and simultaneously the most stressful time of your life. There are so many things to consider: where you are going to work and live, what your career path will be, and how you will start preparing yourself for the financial burdens of adult life.

Since most of you aren't as "financially stable" as Justin Bieber, you are all generally facing the same problems, like student debt, credit card debt, paying rent, and dealing with the cable or satellite company, how we approach our financial situation is entirely up to our individual goals and aspirations. That being said, here are 7 proven financial tips for anyone in their 20s that has the primary goal of keeping your finances in check.

1. Open a savings account

Putting money aside when there are bills to pay and debt to maintain is much easier said than done. Having a cushion to fall back on in the event of an unexpected expense, like a car repair or emergency room visit, or when (and if) you find yourself out of the job, however, is crucial for avoiding debt that will follow you for years to come.

You need to have cash set aside for those worst-case scenarios, preferably enough to pay your expenses for four to six months. I know it sounds like a lot, but life is full of those “I should have” moments, so don’t be caught off guard.

2. Know your credit score

Most people, especially young college graduates, never bother to check their credit score, but maintaining good credit can help drastically improve your financial situation. Your credit score can affect what kind of interest rate you receive on your loans, if you qualify for a rental space or a mortgage, or if you qualify for a car loan when the time comes to buy a new vehicle.

Maintaining a strong credit score is not as difficult as it may seem. Try to ensure you can at least make the minimal monthly payments on all of your bills, including student debt, rent, utilities, and expenses. Maintaining multiple credit accounts can also be favorable because it shows responsibility on your end. Understanding how to maintain your credit score is a vital component to your financial success.

3. Don’t ignore your debts

Believe it or not, more than 50% of current college graduates have student loans that are either in default or delinquent status. While it is no mystery that college graduates are finding it difficult to keep up with their student loan payments in the face of an ever-struggling economy, it is important to approach this situation head on and not avoid calls from your loan providers.

Student loan repayments can be negotiated once you enter the work force. Graduating with your degree, alone, qualifies you for a lower interest rate. Be sure to look into programs that can reduce your monthly payments, lower your interest rate, and potentially decrease your overall balance due. Credit card debts are more difficult to work with, but the best way to go about paying them off is to start with the lower debts and work your way up. Finishing off some smaller expenses will encourage you to keep working to get your larger expenses paid off sooner.

4. Start tracking your 401(k)

Planning for retirement seems a small concern to modern-day 20-year olds, but it is extremely important to understand how your finances are being prepared for retirement. Setting aside 10-15% of your annual income is the best way to prepare for retirement. If you receive retirement benefits from your employer, at least consider setting aside the amount required for your employer to make a full match.

Other factors that come into play when planning for retirement include potential investments and savings fees. Consider sitting down with a financial advisor at your local financial institution to determine your best options for retirement planning.

5. Learn to understand your taxes

Whether you are 22 or 63, understanding your annual taxes can do wonders for your bank account. You want to be sure you are taking advantage of tax breaks that are available to you as early as you graduate and enter the workforce.

Know what expenses you can write off each year, like moving for work, gas and food expenses while working, and mileage on your car if your work requires you to travel. Your student loan repayments are also tax deductible. Again, it is important to discuss all of your options with your financial institution or advisor in order to save as much as possible for the future.

6. Marriage and children come with big price tags

Weddings, alone, can be ridiculously expensive without the stress of beginning a new family right away. That being said, starting a family in your 20s has pros and cons for you to consider. Assuming you have begun to get your retirement and financial plans in order, waiting a little longer to start a family may be a better strategy.

Starting a family now, however, can also qualify you for increased tax breaks and leave you more time to make extra money before retirement when the nest is empty. But beware of factors that are not often considered. Whether or not buying a house, given your financial standings and current market values, and if you need to save for college can play big roles in whether or not you should wait to start having children. Once again, this really comes down to your personal financial situation.

7. Focus on your personal goals

We live in a world where people’s decisions are driven by social media. Often times we can’t help but compare our own situation to the glamour that is reported on Facebook and Twitter. The problem with this is that social media exists to share your triumphs, not keep you grounded in reality.

While you traverse the river of life, remember to never loose focus on your own goals and dreams. Do not let ideal, but false life situations projected onto Facebook profiles and Twitter accounts deter you from your own ambitions. While you work to save for your retirement, find a career that you actually enjoy doing, and look for joy in life that has nothing to do with money or status.

You have your own life to live and your own goals to achieve. How you go about reaching them is entirely up to you.