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

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

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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 Demos.org 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 Mint.com; 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.
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