Seven smart ways to use your money in your 20s
Being in your 20s comes with a newfound sense of economic independence. It’s a time when you’re especially vulnerable to debt that will haunt you, possibly forever – but it’s also an opportunity to make financial decisions that will set you up for success in the future! If you wish you could up your financial game, there are a few time-tested strategies to add some structure to your money habits.
Stay (or get) out of debt
Debt is the number one enemy of your savings and it’s very easy to slip into. If you already have debt that’s growing every year (thank you, credit card interest!), pay it off as soon as possible. You can do this with a cash injection (like your tax return) or a regular portion of your weekly pay. If you’re lucky enough not to have debt, avoid it! Treat your checking account as gospel and think three times before taking on any loans.
Automate your savings
Automated savings is lauded as the easiest way to save – when money is instantly transferred to your savings account, there’s less temptation to spend it. You can set automatic transfers from your pay into your ‘Europe Trip’ account and watch the numbers grow.
For smaller savings, apps like Acorns collect “loose change” from your everyday spending, rounding the price to the next dollar and tucking the leftover cents into an investment account you can track from your phone.
Set a budget
Knowing where your money is going is the only way to keep on top of it. You can keep a spreadsheet (AKA the old-fashioned way) of all your income and expenses, or use budgeting apps like Pocketbook and Expensify to keep up with your money from your phone.
Decide if you need a credit card
For many young people, getting a credit card = debt (see point number one). Depending on your circumstances, you might not really need a credit card – there are other ways to build your credit history, and if you budget right, you can probably cover most (if not all) of your expenses with your checking account. It works for some people, but that is the exception, not the rule.
Have an emergency fund
Before you start saving for an overseas trip or an apartment bond, you should prepare an emergency fund. This is between one to three months’ expenses (the more, the better) that will cover you in the event of unemployment or other unforeseen costs. The best part is that once you’ve saved it, you don’t need to continue contributing until you use it (for EMERGENCIES ONLY).
Throw some money into your super
Did you know that if you earn below $50K per year, the government will give you 50 cents per dollar you contribute into your own super? Or if you earn $37K or less, they’ll throw in 15% of your super contributions (voluntary and through your employer)? If you can spare some cash here or there, you’ll get plenty of bang for your buck while you can. Use this calculator to see how much you could save.
Money can be hard. When you’re starting out, it can feel like you’re not doing enough to take care of your cash. But at the end of the day, your money is there to make your life better, not worse. So don’t feel guilty about going to the movies, upgrading to a large coffee or picking up a pair of shoes you’ve been eyeing off. As long as you have a plan and stick to it, there’s nothing wrong with having fun with your dough.
Chelsea is studying International Studies at the University of Sydney, but has a lot more contact hours with Netflix.