10 Steps for Financial Success In Your 20s (2024)

This post is from our regular contributor, Erin.

It sounds funny to say, but I remember turning 21 like it was yesterday.

Graduating from college? Yep, seems like yesterday, too.

Your 20s are such a great time to treasure.

From graduating college, to getting your first job, to getting married, to starting a family, and to buying a house, tons of major life milestones can occur during this decade.

That’s why it’s so important to have a good handle on your finances earlier rather than later.

I may “only” be in my mid-20s, but I’ve learned a lot in a few years, especially when it comes to managing money.

I know, the subject can be boring, but if you want to fully experience your 20s (and with less stress), I recommend going through the following 10 steps to have financial success in your 20s!

1) Get a Handle on Your Student Loan Debt

If you don’t have to deal with student loans, feel free to skip this step. I’m putting this first on the list because far too many graduates don’t know how much they owe, who they owe, or when they owe. That’s not a good way to start your post-college life.

You’re responsible for paying back your student loans. There are no ifs, ands, or buts about it. You signed a master promissory note before taking out the money. That was a binding contract stating you’re legally obligated to make good on your promise to pay back the money loaned to you.

If you have federal loans (most graduates do), you can look up your loan information on the National Student Loan Data System. This will tell you who your loan servicer is, how much you owe, and what type of loans you have.

Set up online accounts with your servicers as soon as you can to see what your minimum monthly payments are. Set up automatic payments or set reminders for when your payment is due.

I highly recommend beginning to make payments before your grace period is over. You should develop the habit as early as possible, as long as you have the money for the payments.

2) Create a Small Emergency Fund

You likely won’t have a lot of liabilities if you’re in your early 20s. A car might be your biggest concern, aside from healthcare costs. For that reason, you don’t need to go crazy with an emergency fund, but a small one is still good to have.

Consider saving up at least $1,000 to cover you in case something happens. You don’t want to use your credit card in emergencies if you can help it, as the interest accrued on the balance will work against you.

Where should you save it? Hopefully you have a savings account opened, but if not, start there. Online savings accounts generally have better interest rates than local branches, and they also have less fees to worry about. (You should also have a checking account!)

As your responsibilities grow (like becoming a homeowner), make sure your emergency fund grows with them.

3) Learn How to Use Credit Responsibly

We’ve covered this before, so I’ll be brief, but if you haven’t learned how to use a credit card properly yet, now is the time to do so. Opening a credit card can be a good idea if you can trust yourself to be responsible with your spending. This will help you establish credit. Carrying a balance, however, will hurt your credit.

Treat your credit card like a debit card: don’t charge more than you have in your bank account. Credit cards are not a way to afford what you otherwise can’t. It’s not free money.

4) Start Contributing to Retirement Funds

I really wish someone had told me the importance of this when I had my first job. Sure, we might have a vague idea that saving for retirement is important, but it’s so far away, it can be hard to focus on.

There’s this thing called compound interest you don’t want to miss out on. In a nutshell, the earlier you save, the more time your money has to earn a return. Even if you can only save $20 per month, something is better than nothing. It will all add up in 40 years when you’re ready to retire.

Find out if your employer offers a 401(k), and if they offer matching contributions. If they do, great! Contribute enough to get that match, because it’s free money.

If they don’t, consider opening a Roth IRA or a Traditional IRA. Unfortunately, none of my employers offered a 401(k), so I opened a Roth IRA with a starting balance of $1,000. Depending on the broker, you may need even less to open one! There’s no reason not to.

5) Pay Off High Interest Debt

I know – your money is going every which way at this point. You’re saving for an emergency fund, you’re saving for retirement, and now I’m telling you to get rid of high interest debt.

This will likely be credit card debt, as APRs on credit cards average around 15%. In contrast, the highest interest rate on my student loan debt is 6.8%.

You can always choose the snowball method to paying off debt, but it’s worth prioritizing high interest debt as it will cost you more in the long run.

6) Track Your Spending

Being aware of how much you’re spending (and how much you’re earning) provides a foundation for taking the aforementioned actions. You need some sort of plan for your money to succeed with your financial goals!

The easiest way to start with this is to go back through your history of transactions. If you use cash, you might have to record your transactions going forward, but if you use a debit or credit card, then pull up past statements and go through them.

You can also use a service like Mint.com or You Need a Budget. Both require you to enter your various account information, and they’ll aggregate data from those accounts to give you a picture of what your financial situation looks like.

7) Set Financial Goals

We’re reviewing a few goals here, such as paying off debt and saving for emergencies and retirement, but you should also think about medium and long-term financial goals.

Of course, goals can change. I know what I wanted out of life when I was 22 is different from what I want now. That doesn’t mean you shouldn’t be working toward something. Even career-related goals count (wanting to make $X per year).

Do you eventually want children? A house? To travel? To retire early? All of these require further planning.

If you’re awesome enough to land a well-paying job right out of college, you might also want to consider hiring a financial planner to help you reach your goals. “Outsourcing” money management might seem a little odd, but having another pair of eyes on your financial choices can help you avoid making any major mistakes.

8) Consider Your Insurance Needs

This is going to be different for everyone. I’m very lucky to be covered under my parents’ health insurance for the time being, but I don’t have optical or dental insurance (hello, emergency/healthcare fund!). Others aren’t so lucky. Review what your insurance needs are and plan appropriately.

This goes for life insurance as well. You might consider this later in your 20s, once you’re married or have kids, but it’s still important to think about! If you have people depending on your income, you need to protect it. The same goes for disability insurance.

As a side note, once you do get married (or maybe you are!), update the beneficiaries on your accounts. You should also look into estate planning and creating a will.

9) Keep an Eye on Your Credit

Maintaining a good credit score throughout your 20s will greatly help if you plan on applying for a mortgage or for a car loan at some point. Having a good credit score can also help when renting an apartment, getting a job, or getting a lower interest rate on a loan.

Monitor your credit score using a free site such as Credit Karma or Credit Sesame, and take advantage of getting three free credit reports throughout the year on annualcreditreport.com. Look out for any errors to ensure your score accurately reflects your credit activity.

10) Know When to Cut Back and Earn More

When I graduated college, I was focused on keeping my expenses as low as possible so I could keep more money in the bank. Within the past year or so, I recognized the limitations of cutting back, and started focusing on earning more instead.

There’s a balance to be achieved here, so figure out what works well for you. You can start a side hustle and develop more skills (which also helps when looking for a job), or you can be practical with your frugality and cut back on things that don’t matter to you as much. Always try and spend according to your values.

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When you’re in your 20s and just starting out on your financial journey, it’s okay to start small. The biggest hurdle is just starting. You don’t want your 20s to pass by in a blur, only to realize you have little to nothing saved for retirement by the time you’re 35. By following these steps, you’ll be well on your way to creating a good financial foundation for the rest of your life!

What do you wish you had done differently in your 20s? Did you struggle with anything listed? Which things did you succeed with?