Financial Education

The 13 Most Important Steps to Take to Improve Your Personal Finances in Your 20s

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As your college days come to a close and you prepare for the “real world,” you might wonder how to set yourself up for financial success.

Whether you are struggling to make enough money at your dream job or are striving to become a millionaire, look at these tips below to get started.

1. Create a Budget

First, create a budget, like for when you organize an event. Take inventory of all your expenses and be realistic about how much you spend on each item.

A budget will set up healthy spending patterns and a foundation to financially plan for the future. Consider making a minimalist budget to help you save more.

If creating and keeping track of a budget seems daunting, check out some of the time-saving, user-friendly budgeting apps such as Mint, Nerdwallet, or Goodbudget. Those apps are highly rated both in the App Store and on Google Play, and free offer versions.

2. Cut Overspending

Once you’ve created a budget, take an honest look at your spending patterns. Notice the areas where you are overspending and cut costs.

If you’re eating out for more than a meal or two each week, for example, you’re likely spending too much on food. Plan to cook more and eat out less, and make sure you don’t buy more groceries than you need, as you will end up throwing a lot away.

Start thinking minimalistically about possessions, too, and only buy those you absolutely need.

There are plenty of easy changes you can make to cut unnecessary expenditures.

3. Buy Smarter

Look for ways to save money on purchases and learn to be frugal. Frugality is about more than simply buying store brands and using secondhand items, though those things certainly help.

You can save more money on the types of things you already buy by doing some research. Before going shopping or traveling, for example, search for digital coupons and discounts. This applies to retail stores, grocery stores, restaurants, and hotels.

Also consider shopping the sales when you need something. Buy items on clearance at the end or after the season for next year, such as buying sweaters in March, which can be as much as 90% off at some stores by then.

If you need a table, a desk, a lamp, or anything else you can use secondhand, look at your local thrift store or at neighborhood yard sales.

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Remember that being frugal isn’t reserved for a certain income bracket. Wealthy people value frugality, too, to free up more money to make good investments.

4. Establish Good Credit

Build up your credit so that you can take out a mortgage, qualify for a business loan, or borrow money should the need arise.

Use a credit card for an affordable purchase and pay it off immediately. Research the best credit card for you; There are many credit cards with great rewards programs, awarding savings on gas, travel, hotels, or a number of other expenses.

Or, build up good credit by paying your student loans and other debt on time. Every time you make a payment on time, it will boost your credit score. If you fall behind, it will hurt your credit score and negatively impact your future finances.

5. Repay Debt

Prioritize repaying your debt to get to a healthy place financially. If you don’t pay debt, it accrues interest and possibly other penalties, meaning you will pay more money in the long run. It’s cheaper to pay it off more quickly.

Pay on the principal and the interest of your student loan debt. Any interest that is not paid is added to the principal, making the next amount of interest even bigger. Make a long-term plan to repay these loans and avoid deferment.

6. Make a Savings Plan

Create a savings plan and account to increase your wealth and prepare for the future.

Start putting away a percentage of your income (20% is a good place to start) with each paycheck, and then increase that amount over time. The more you put away now, the bigger the payoff will be from compound interest decades from now.

Building up savings guarantees you’ll have enough for big purchases or retirement later.

7. Create an Emergency Fund

Unexpected emergency expenses such as losing your job, a sudden illness, or a natural disaster can happen at any time. Create an emergency fund to be prepared when they do.

Experts advise that you put aside 3 to 6 months’ worth of expenses. You won’t have that much at the beginning, but you can deposit small amounts regularly in a savings account that accrues interest.

8. Invest

Take baby steps as you learn where and how to invest.

One popular area to invest in is cryptocurrency. You can buy it directly, invest in a cryptocurrency company, buy it from an exchange, or even invest in a cryptocurrency Roth IRA.

If you don’t know anything about investing, use a robo-advisor such as Betterment or Wealthfront, or an online broker. Advisors can help you decide where and how much to invest- just be wary of fees!

You should also consider investing in stocks, ETFs, mutual funds, IRAs, or 401Ks.

9. Start Planning for the Future

Start financially planning for your future family, lifestyle, house, and retirement.

Create a savings plan and stick to your budget to reach your financial goals.

The best way to start planning for retirement is by investing in a tax-advantaged retirement plan such as a 401(k), but there are many retirement plans.

10. Combat Inflation and Rising Interest Rates

Inflation has risen dramatically and will continue, so prepare accordingly.

Grocery costs, for example, rose over 10% from April 2021- April 2022. But inflation did not affect all groceries equally, so adapt by buying some of the less-expensive items.

As meat costs rose 14.3%, and are typically the most affected by inflation, buy produce and grains instead.

To combat rising gas prices, carpool to work, take public transit, or travel less.

Interest rates are affected by inflation, too. Your debt will grow during this time, so you might want to consider debt consolidation to lower the amount of interest your individual loans or credit cards accrue.

11. Prepare to Pay Taxes

Now that you’re on your own, figure out how to file and pay taxes. This requires setting aside funds to pay taxes based on the tax bracket you are in and your income.

If you feel lost or intimidated about filing taxes, hire someone to help. If you’re using a company such as Turbotax or H&R Block, rates start at a few hundred dollars.

Alternatively, you can have your personal accountant help you prepare financially and fill out your tax forms.

12. Start Giving

Your twenties is a great time to start giving. Not only will you be supporting a worthy cause and making a difference in the world, but your tax-deductible charitable donations can bring you into a lower tax bracket.

Plan your charitable giving during a year your income is higher to avoid being pushed into a higher tax bracket. A higher tax bracket means you will pay a greater percentage of your income to the government. To avoid this, donate just enough money to keep you in the same tax bracket.

13. Ask for a Raise or Change Jobs

If your budget and financial goals seem unattainable with your current salary, assess whether you are being paid enough.

If you’re not being paid a fair-market salary for your experience and education, ask for a raise. There are plenty of resources to help you determine how much you should be paid, including the U.S. Bureau of Statistics,, Glassdoor, and Payscale.

If your employer won’t give you raises, look for a job offering the income you need to meet your financial goals.

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