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8 Things You Need To Know About Money In Your 20s

Your mid or late 20’s might be the most important period in your life. It’s a period where you will have to make most of life’s major decisions, like getting married, buying a house, or having and supporting children. So to ensure financial success or to become financially independent, you need to know about these personal finance tips. Click here to find out the 8 financial tips I would Give My Twenty Year Old Self.

1. First, educate yourself about personal finance.

While you’re young, you need to learn everything there is to know about personal finance. They don’t teach you about personal finance in college. Even if you’re a business major, you might learn about supply and demand but not necessarily personal finance like how to spend your money wisely, how  to save, or how to do a budget.

But with the help of personal finance books, you can learn anything from paying off your credit cards to investing your money. Here are some of the best personal finance books that can help you started.

If you want learn more about personal finance, read the following books:

2. What to buy a house? then compare mortgage rates.

If you’re going to buy a house, shop around with multiple mortgage lenders to get the best mortgage rates. A common mistake first time home buyers often make when shopping for a loan is that they pick one mortgage lender and stick to it. That’s a big mistake. When you do that, you have no idea what other rates are available for you.

So you need to compare mortgage rates from at least three or four lenders to ensure that you get the best rates on your mortgage. Getting the best rate will not only drive your monthly payments down, you will also save thousands of dollars in interest over the loan’s term.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

3. Check your credit score on a regular basis and fix any errors.

Even if you don’t need your credit score right away, it’s always a good idea to always know what your credit score is. If it’s low, then take steps to raise your credit score.

It’s important to maintain a good credit score, because the higher your credit score the more likely you will get qualified for a house loan or car loan. A higher credit score also indicates to lenders that you are responsible and likely to repay your loan on time.

4. Try to pay off your credit Card debts.

You have to make a firm commitment to get out of debt. Pay off the debt with the highest interest rate first, then move on to the next highest. Paying off credit card debts can help you reach your personal finance goals sooner.

Related: 9 Fastest Ways to Dig Yourself Out Of Debt.

5. Invest your money if you can.

As a 20 year old something, you have a lot of advantage as opposed to a 40 year-old person. In other words, time is on your side and you can take advantage of compound interest. 

So, if you have a job, invest in your employer’s 401k. If your employer doesn’t offer a 401k, you can independently open a Roth IRA. Try to contribute to the maximum allowed by law.

You can also invest in a mutual fund company that has low expense ratios like Vanguard. With a mutual fund, you can expect to earn anywhere 8 to 10 percent annually on your investment.

You can also invest in the stock market by using an online broker like Ally Invest.

If you want to invest more money, look into passive income opportunities, like rental property investments or peer-to-peer lending.

6. If you can’t invest big chunk of money, no pressure. Invest your spare change.

Another mistake most 20 something year olds make is that they think they have to have a lot of money at their disposal in order to invest. They suffer from what is called “not enough” mentality that if they don’t have $1000 or $5000 money to invest, they will just not invest period. What they don’t realize is that you don’t necessarily need that much to get you feet wet in the investment world.

You can invest your spare change with Acorns. Acorns automatically invests for you. It is a cell phone app that rounds up your credit card and debt card purchases, and invests your spare changes.

Click here to start investing your spare changes with Acorns. You can get started under 5 minutes.

7. Save, save, save.

You may not have thought about it, but every dollar you save now is one step further toward financial independence or financial freedom. The freedom to retire early, the freedom to travel to exotic islands, or the freedom to stay home with your kids.

So get into the habit of saving. Make it a point to save something at least every pay period. The best way to save is to do it automatically by depositing it to a savings account you don’t touch. That way you don’t see it, therefore you won’t spend it.

If you receive a bonus or a tax refund, save half of it. Although it’s tempting to reward yourself after a raise or bonus, but don’t spend it all on things you don’t actually need.

8. Make Extra Money.

Making extra money by doing side hustles or completing surveys can help you reach some of your personal finance goals, such as paying off debt. Here are some ways to make some extra cash.

  • InboxDollars pays you in cash to watch fun videos, take surveys, play games, shop online, search the web and more.. They’ll also give you a $5 bonus for free just to give it a try. By spending just 5 to 10 minutes on your free time, you can earn $50 to $70 a month with InboxDollars.

In conclusion, these are the essential topics around personal finance you need to know in your 20s. You need to take advantage of your employer’s 401k matching. You need to save your money and avoid spending it on things you don’t need. Investing your money is also important even if you don’t have a lot. Most important of all is to educate yourself about personal finance. If you follow these money tips, you’re likely to attain financial success.

Work with the Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your saving goals Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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