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Money Tips for 20-Somethings: 24 Ways to Get Smart About Your Finances


Post-college finances can be tough to manage. Here are two dozen pro-grade tips to help you feel less anxious about money.


Without a doubt, the majority of my anxiety as a 23-year-old working adult is related to my finances, and I would assume that the rest of my generation feels the same way.

As of last December, 40 million Americans had student loan debt, with the total amount due approaching $1.2 trillion. Since 1999, student debt has grown by over 500%. Even scarier, salaries have not kept up -- in fact, they haven't even come close: Since 2000, the average yearly earnings for someone between the age of 24 and 35 has decreased by a full $10,000.

The student debt crisis is extremely troubling for 20-somethings, but it's definitely not the only major financial problem we face. With the effects of the recent recession still lingering, work has become harder to find. According to a report from 2011, 48% of 25- to 34-year-olds said that they were unemployed or underemployed, and a full 70% said that it was harder to make ends meet than it was four years prior. The economy has recovered since then, but times are still very hard for young people who are starting their careers.

To get a sense of the best ways 20-somethings can manage their money, and their money anxiety, I corresponded with several financial professionals to put together a list of 24 financial tips. Be forewarned: Following the advice listed here will require you to be disciplined and focused, and to put a great deal of effort into your financial well-being. If you are ready to work hard, you can create a strong financial foundation for yourself while you're still in your twenties.

1. Be Realistic About Your Goals

It's important to understand that saving doesn't come easy. It takes a lot of work and a lot of time. As Ross Lawrence, a 26-year-old personal finance advisor at the Missouri-based Hoffman Financial Resources told me, "After graduation, 20-somethings often have an over-inflated value of themselves. Graduates tend to take on a lot of debt with the expectation of making tons of money. BMWs, house down payments, and 3-carat canary diamond engagement rings are not going to fall from the sky. It took your parents 30 or more years to accumulate the things they have. It will probably take you the same amount of time."

2. If You Can Stand It, Live at Home

Thomas F. Scanlon, a CPA at Borgida & Company, a certified public accounting and consulting firm in Connecticut, recommended this one, saying, "If you can stand it, live at home. As long as you can. Very low overhead. Makes it easier to save." Of course all of that is true, but for some of us, the freedom that comes with living on our own is worth more than the potential savings of staying with our folks.

3. Find the Fun in Penny-Pinching

Learn to love the lifestyle that goes with being frugal and young, particularly when it comes to buying clothes (try secondhand stores), cooking (see how delicious and healthy a meal you can make for the cheapest dollar amount), and outfitting your home (many decorations and even smaller pieces of furniture can be put together for much cheaper than the sticker price). The key word is lifestyle: being smart with your money is a lifestyle choice, and a thrifty way of living goes hand in hand with the DIY (do-it-yourself) approach.

There are literally thousands of great DIY resources online. This list from Buzzfeed, 41 Creative DIY Hacks to Improve Your Home, for example, features simple DIY projects that can help you save money. As for creative and cheap approaches to cooking, check out A Girl Called Jack, the blog of Jack Monroe, a young, British single mother who has been called Britain's "Austerity Celebrity." (Though her story is moving and eye-opening for anyone who worries about the economy, her writing and work has also attracted legions of fans.)

4. Spend Less Than You Earn

Simply put, you have to spend less money than you make. I know this sounds blatantly obvious, but many young people don't live by this central tenant when dealing with their finances. Sean Nisil, a financial planner from San Diego and creator of the blog Intentional Stewardship, can not stress this enough: "Make a formal budget and spend less than you earn. Seriously. As a financial planner, I can attest that this is the number one rule to financial stability, regardless of whether you have millions of dollars or just a few pennies."

5. Make a Budget

To spend less money than you earn, you need to make a budget, and you need to take that budget seriously. Nisil recommends using; the website service sends email alerts when you've exceeded your budget in order to keep you accountable (or at least attempt to).

Ellie Kaplan, the CEO and Founding Partner of the New York-based Lexion Capital Management, one of the few 100% woman-owned asset management firms in the US, recommends a 50-30-20 plan to help young people start a budget: 50% of your income should go to necessities like rent, student loan payments, bills, and groceries; 30% is spendable income; and 20% goes into savings. Of course, this not a hard and fast rule. If you live, say, in New York City, the cost of rent alone may be well over 50% of your income.

6. Really Track Your Spending

Ideally, you will know exactly how much money you spend every week, as this is the only way to stay true to your budget. Alan Moore, Founder of Wisconsin-based Serenity Financial Consulting, says, "There is one thing that most wealthy individuals have in common -- they know how much they are spending. While 'spend less that you earn' is good advice, you can't follow it without tracking your spending so you know exactly how much is going out every week."

This means tracking everything, down to every single Starbucks (NYSE:SBUX) coffee, every single quarter spent on laundry. Write it all down.

7. Put Saving Ahead of 'Wish List' Spending

To help with your budgeting, it is important that you assign relative value to certain expenses and savings so that you can prioritize your financial health.

As Gene Natali, author of the personal finance book The Missing Semester, tells me via email, "It's as simple as sorting obligations, needs, and wants. Obligations must be taken care of first. Needs vs. wants allow for more flexibility. This allows us as individuals to list (in order of importance) the places our money will be going (also called budgeting)."

Natali believes that one of the major problems with our country's economic well-being, and with that of 20-somethings specifically, is that we allow our spending to dictate how much we save. He argues that we should assign more value to saving than spending, and that our saving goals should dictate our spending. In other words, we should only spend on unnecessary purchases after we've saved a certain amount. That, of course, requires self-discipline.

8. Open a Savings Account

If you do not have a savings account, you should open one immediately. Then, make a point of not withdrawing from it -- only make deposits. Sean McComber, CFP at the Maryland-based Key Financial Group advises, "Make a regular and recurring transfer from your checking account into a savings account every month as part of the bills you pay."

Saving should be a regular thing, just like playing for your rent or electricity. In this way you will accumulate money for when you need it later in life.

9. Open a 401(k)

If your employer offers a 401(k) program, enroll right now. (Leave this tab open, go do it, and come back to finish reading my story.) A 401(k) will allow you to put away a certain percentage of every paycheck automatically. Moreover, the money in your plan will be invested in funds of your choosing, and therefore increase in value over time (decades) with those particular funds.

Most every one of the professionals I spoke to for this story agreed that a 401(k) is a great way for young people to start saving and accumulating wealth. As personal finance advisor Ross Lawrence says, "With student loans, car loans, and run-down one-bedroom studio apartments, your IRA or 401(k) will quickly become your biggest asset. Don't just 'set it and forget it.' Take time to understand what you are investing in and what you can expect going forward."

10. Take Advantage of "Free" Money

One of the best examples of "free" money is when your employer matches contributions to your 401(k) retirement account. If you know your employer matches contributions, there is no reason in the world why you shouldn't open up an account and start putting money away while earning "free" money in the process. Other examples of "free" money might include lunch or travel paid for by your employer.

As San Diego-based financial planner Sean Nisil puts it, "Missing out on free money is stupid. Don't be stupid."

11. Open a Brokerage Account

Once you have a savings account, and if you have any money to spare, you may want to open a brokerage account and put some money in play on the stock market. There is a wide array of ways to grow your money in the market, from investing in conservative mutual funds to buying more aggressive stocks. It is vitally important to note here, however, that you should not confuse your savings account and your brokerage account. A savings account comes with a heck of a lot less risk than a brokerage account. When investing in the stock market, you should be very careful: While the hope is always that your stock will increase in value and make you money, your stock could also lose money, and at absolute worst, its price could go to 0 and you could lose everything. (See: 10 Questions About Investing in Stocks That Every Beginner Asks)

Of course, there are more conservative ways to put your money in play, and if you're not familiar with how markets work and how to research funds or stocks, it's best to play it safe. Sean McComber of Key Financial Group advises his clients to always start with a savings account and work on bringing the value of that account up to about six to 12 months' worth of living expenses, depending upon a client's specific needs. From there, McComber's advises his clients open a money market or certificate of deposit (CD) account, both of which offer slightly higher returns than a savings account, but less liquidity. Only following these two steps should someone go on to invest in a conservative investment allocation, says McComber. Any brokerage account can help you determine the optimal combination of stocks and bonds for conservatively increasing your yield and limiting your risk.

As McComber explains,"By the time a client has filled all three tiers, they have well a well-diversified foundation, with money they can access quickly (savings account), money they can get to in an emergency (money market or CD), and money for higher growth (investment)."

12. Invest In Dividend-Paying Stocks

If you do open a brokerage account and decide to invest in the stock market, consider investing in a stock that pays dividends. A dividend is a portion of a company's earnings that is distributed quarterly based upon how many shares of that company you own (for example, if you own 100 shares and the dividend is $0.44 per quarter, you'll make $44.00 per quarter).

Marc Lichtenfeld, the Chief Income Strategist at the Oxford Club, a private financial organization in Baltimore whose members control an estimated total of $18 billion in investment assets, says that for 20-somethings, his main advice is to invest in stocks that annually raise their dividends, and then reinvest those dividends. (Reinvesting dividends means that you receive your dividends from a company and immediately put them back into your holding of that company, increasing your stake.) By investing in stocks that increase their dividends, Licthenfeld explains that "there is no reason why an investor can't triple their money in 10 years and generate a nearly 10x return in 20 [years], and that's in conservative dividend payers with a one-time investment."

Some solid companies that continually increase their dividends include Procter & Gamble (NYSE:PG), 3M (NYSE:MMM), Johnson & Johnson (NYSE:JNJ), Target (NYSE:TGT), PepsiCo, (NYSE:PEP), Wal-Mart (NYSE:WMT), McDonald's (NYSE:MCD), and Exxon Mobil (NYSE:XOM), to name a few. To see a full list of the stocks that have annually increased their dividends for the last 25 years, click here.

13. Get Insured.

For McComber's clients, the next step is to establish appropriate strategies to make sure their lives are not thrown off kilter by accidents or events outside of their control. In other words, McComber suggests buying insurance.

"Renters insurance, homeowners insurance, vehicle insurance, and umbrella insurance protect us from liability and loss of property while health insurance, life insurance, and disability insurance protect us from unpredictable events and illnesses. Without disability insurance, how will you pay your bills if you're hurt and can't work? Where will you live if your apartment is flooded by your upstairs neighbor? These are the types of concerns we need to cover with a well-designed insurance plan," says McComber. He recommends talking to a financial planner about insurance, but you can also go straight through insurance companies by getting quotes and comparing prices online.

According to Lindsey Pollak, a bestselling author, keynote speaker, and career expert at The Hartford Financial Services Group, all 20-somethings should have disability insurance. "Younger workers may think their health isn't at risk, but disability insurance can cover more mundane reasons to be out of work," she says, adding that pregnancy is the most common reason millennials need to take time away from working, though accidental injuries, such as sprains and concussions, and diagnoses, such as depression and anxiety, are also frequent occurrences.

The Hartford Group compiled a study to find how many young workers know the value of disability insurance. The study found that if young workers were not able to work for over six weeks because of an accident or serious illness, 33% would dip into their savings, 21% would draw from the their 401(k) plan or use credit, and 22% would ask family or friends for a loan. With proper insurance, there would be no need to break into savings or rely on family.

Disability insurance can be arranged through your employer for less than a dollar day, so take advantage of it.

14. Use Technology to Your Advantage

According to Steve Kramer, Vice President of Electronic Payments at Western Union, "One of the strengths of Gen Y is that they're very tech-savvy people. They grew up with the Internet, mobile, and other technologies that can help them establish [budget] goals."

The aforementioned comes to mind as a helpful tool, but there are several other valuable programs and apps that can help you keep track of your finances: Try Expensify to keep track of travel expenses, BillGuard to review your credit card statements and quickly report any questionable charges, and Check to help you keep track of and pay your bills, all from one place. Most banks and brokerage firms also have apps that allow you to track your expenses, savings, and investments on the go.

15. Automate Everything

Ever wish you had an autopilot feature for the less enjoyable parts of your life, such as doing laundry, shopping for groceries, and cleaning your bathroom? Well, there's probably technology for those things, but let's stay on topic and talk about automating your finances. Anthony Kure, the owner and president of the Ohio-based, fee-only financial planner Kure Net Worth Management, says, "You rarely miss money you never see...I believe designing a purpose-driven savings and/or investment account goes a long way toward transforming your income into savings on autopilot."

Kure recommends sending a certain amount of every paycheck into a savings or investment account so that it never touches your checking account. This allows you to be disciplined about your savings without ever having to ask yourself: "Should I spend my money on a new iPhones 5S and contract when I already have an iPhone 5, or save it instead?"

Ross Lawrence of the Missouri-based Hoffman Financial backs him up, and suggests setting up automatic bill-paying functions and subscribing to a budgeting website that alerts you if a bill is above or below the norm. Why is this important? As Lawrence explains, "One of the biggest factors in determining your credit score, and one of the easiest to control, is missed or late payments. Automation can ensure that you don't miss a payment and also tell you about any pesky bank fees."

16. Clean Up and Protect Your Credit Score

Paying bills on time is the single largest factor in calculating your credit score, so put all your bills on auto-pay so you never miss a payment.

For this, Alan Moore of Serenity Financial Consulting, recommends using to pull up your free reports. He advises that young people "go through them with a fine-tooth comb to be sure all of the information is correct.

"Most folks find an error the first time they pull their report, so go ahead and do so," he says. "Don't wait until you are denied credit to pay attention to it."

17. Educate Yourself

Read up on personal finance (see our list of recommended books and blogs below). Do the research and aim to know as much as you can. Dana Twight, CFP, the Founder of Twight Financial Education in Seattle, suggests in an email one simple way that 20-somethings can educate themselves beyond research: "Consider your upbringing and try to connect things your parents did (or didn't do) with your current ideas and behaviors around money."

For example, recall ways that your parents saved money on food, travel, and other expenses. Did they use coupons, hunt out deals, or budget in a specific way? Did they make dinners that could last for days as delicious leftovers? Or did they blow a lot of money on restaurants -- and have you adopted the same habit?

18. Find a Financial Mentor

As Todd Christensen, the Director of Education at the National Financial Education Center tells me, "Whether a parent, sibling, aunt or uncle, neighbor, or friend, find someone who is financially successful and ask them about their habits and behaviors."

Look for someone who will not just tell you about finance or teach you how to invest; look for someone who will involve you in their ongoing decisions and discuss past ones, someone who will explain, "This is why I decided to open a Roth IRA," or "This is why I invested in Google (NASDAQ:GOOG)." As Benjamin Franklin said, "Tell me and I forget, teach me and I may remember, involve me and I learn."

19. Get a Handle on Student Loans

Way back when you were choosing what college to go to, you probably took student loans and debt into account. That being said, the only way to truly feel the weight of student loan debt is to graduate, enter an entry-level, low-salary job, and have tens of thousands of dollars to pay back, plus interest.

Ellie Kaplan of Lexion Capital Management offers simple yet insightful advice for how get a grip on student loans. Her advice was to start early, and to take your time. As she said, "The key idea is not that a graduate must put all of their earnings into their student loans, but that they make progress on those loans every earning period. Making sure there is a dedicated flow of money into the student loans will ensure they don't get out of control and that they will eventually be paid off."

Serenity Financial Consulting's Alan Moore offers obvious but oh-so-important advice: "You need to know how much you owe, what the interest rates are, and craft a plan to pay them off." Don't guess, don't estimate. Know exactly, to the cent, how much you owe. Moore recommended using free services like and to help track loans and create pay-off plans.

20. Keep an Emergency Fund

According to the Florida-based consumer financial services company Bankrate, 28% of Americans do not have any emergency savings. That means nearly one-third of Americans do not have a plan ready in the case of any kind of unexpected cost -- say your car breaks down, or you need to book a last-minute flight, or for some reason your pay check doesn't come through and rent is due the next day.

If you don't yet have any kind of emergency fund, Dana Twight, of Twight Financial Education,commends building up the fund by weekly or monthly deposits into a savings account. And as for where that account should be? She said, "Identify a 'bank of inconvenience' and sign up for a direct deposit via your employer." Basically, find a new bank, open a savings account that you mentally label "for emergencies only," and make arrangements with your employer for regular direct deposits into that new fund.

21. "Don't Wish It Were Easier. Wish You Were Better."

This is more of an attitude and lifestyle choice than a concrete step, but it can prove extremely helpful: Sean Nisil, the Sand Diego-based financial planner, thinks that all 20-somethings should memorize this quote. As he told me, "Twenty-somethings need to learn the joy of delayed gratification. Building small, positive habits with your money now will snowball into financial freedom later in life."

The point is, don't lament how difficult it is to make a decent living and save money (because it is). Instead, rise to the challenge: Be a better saver, educate yourself, get a better job, and be proactive about your future and about becoming financially secure.

22. Donate Time, Not Money

Philanthropy isn't just for rich people: The best investment young people can give back to their community and society is their time. As personal finance author Gene Natali tells me, "Time is often more valuable than money, and there are countless organizations that would gladly have cash-strapped 20-somethings volunteer their time. As one example, I've been coaching Special Olympics athletes for six years now. It's a terrific organization, and all they look for from the coaches is our time."

If you are interested in giving back, consider large organizations like the Special Olympics, Big Brothers Big Sisters, and the American Red Cross, which are almost always in need of help, as well as smaller organizations in your neighborhood. By giving your time instead of money, you'll be saving more and making a direct, personal impact. It's a win-win.

23. Create a Dream Board

It is obviously important to have specific goals, but perhaps even more important is to have a way to keep them vital and alive for you, and to constantly remind yourself where you want to be.

Ozeme Jeanna Bonnette of the Fresno, California-based Tri-Quest Investment Advisors recommends a dream board. "Even though we are in a digital age, it's nice, and motivating, to see pictures of your dreams on a mirror, the refrigerator, or anywhere else that you frequent. This will make your dreams feel more realistic, and encourage you along your journey," she explained.

As Yogi Berra once said, "If you don't know where you are going, you might not get there."

24. Don't Put Money Ahead of Life

It is important to know your own financial goals and to write those goals down, but remember that your goals shouldn't only focus on how much money you want to earn in your lifetime. Rather, as National Financial Education Center's Todd Christensen explains to me, "It involves writing down activities and items that are truly important to you and that you need money for in the future. Generally, we will find life most satisfying when we invest time in the relationships with people in our lives, rather than spending money on stuff."

In other words, rather than buying those shoes you want but don't need, have dinner with an old friend who's in town. It's the smart thing to do, both for your finances and your happiness.

For further reading, here is our list of recommended finance blogs for 20-somethings:

20 Something Finance

YoPro Wealth

Debt Free in Three

Sweating The Big Stuff

No Dollar Left Behind

Follow me on Twitter: @JoshWolonick and @Minyanville

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