Financial Planning Tips in Your 20s: Books, Budgets, and More Resources
Your 20s are an important time to start building your financial portfolio. If you plan correctly, you’ll be able to meet all your financial short-term and long-term goals. Financial planning in your 20s involves managing your income so you can navigate life without encountering unexpected expenses or accumulating too much student loan debt.
Whether you’re a student, employee, or entrepreneur, financial stability should be a priority. In order to hit your financial goals, you must seek out financial planning tips in your 20s and financial planning resources in your 20s. In this article, we’ll help you figure out what you should and shouldn’t do, and the best courses and software that will help you reach your goals.
Top 5 Financial Planning Tips in Your 20s
It’s never too early to learn financial management techniques. Your 20s are the best times to lay a solid foundation for your financial life, and the decisions you make at this time will stick with you. So, whether you are busy working remotely in a new job or you’re making plans to get married, you need to plan wisely. The tips below will help you get started.
1. Create a Budget
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Proper budgeting is an important aspect of financial health. You should break down all your finances, starting with your income, monthly expenses, and any student loan payments you need to make. Once you’ve written a budget, you’ll be able to see where you can cut back your monthly bills by spending less. A budget will help you reduce your student loans, pay your bills on time, and secure your financial future while still saving for retirement.
2. Get Insured
Insurance is the best way to protect your property yourself in your 20s. Life is unpredictable, and anything can happen to your assets or your health. Buying health insurance will improve your quality of life and will also reduce the stress of any surprise medical costs you may run into.
3. Start a Retirement Plan
Your 20s are an excellent time to start your retirement savings plan. Any financially literate 20-year-old should be putting at least a small percentage of their income into a retirement fund. The earlier you start saving, the more time the money you’ve put away into retirement accounts will have to mature. If you’re struggling with this step, you may want to seek out a financial advisor.
4. Have a Plan for Emergency Expenses
Sometimes, you may encounter unexpected costs. Your car might get damaged, you might get sick, or you may need to make a major purchase worth thousands of dollars. As a rule of thumb, these expenses shouldn’t be taken out of your savings account or monthly budget. Rather, they should be taken from an emergency fund. Your emergency savings don’t have to be huge, but you should put a small percentage of your income into it over a period of time.
5. Build Up Your Credit
Having a good credit score is important because landlords will often conduct a credit check before letting you move in. A good credit score can also impact the interest rate your bank will offer you on a loan. Your credit history shows whether you can manage your money. Having a good credit score should be a major part of your financial goals in your 20s.
5 Financial Mistakes to Avoid in Your 20s
Most mistakes, especially when it comes to your finances, are avoidable. Money works on principles. So in order to make your money work for you, try to avoid these money mistakes.
1. Not Setting Goals
Having short-term goals and long-term financial goals will give you structure. Without them, there is a high probability that you’ll misuse your money. Short-term financial goals can be something like buying a phone or cutting back on living expenses. Long-term goals might be buying a house or preparing for retirement. Whatever your goals, it’s important to start saving while you’re young.
2. Failing to Pursue Financial Independence
In the current economic climate, it’s not uncommon for 20-year-olds to rely on their parents or other family members for money. That being said, making financial decisions without proper planning and expecting your family to absorb the costs can cause a strain on your relationships. Learn to be financially responsible and independent.
3. Not Paying Off Credit Card Debt
Not paying off your credit card is a terrible idea. It reduces your credibility and ability to secure bigger loans at better interest rates. Avoid racking up debts you can’t pay off at the end of the month. Clear your outstanding debts by setting up a monthly automatic transfer. Using your credit card may be tempting, but you need to learn to control the urge to spend.
4. Spending More Than You Make
Spending more than you earn is an unwise decision. The temptation to purchase luxury items and feel the rush of dopamine is ever-present, but you should not regularly indulge. One of the most important financial rules is to live within your means.
5. Getting Financial Advice from Untrusted Sources
In your 20s, the first place you go to seek answers might be from friends or the Internet. As much as this is a comfortable solution, you shouldn’t take their word at face value. If you have questions concerning your finances, make sure the investment advice you’re receiving is the best thing you can do with your money over time.
How to Make a Budget In Your 20s
Budgeting is a crucial step toward financial success. Seeing your paycheck come in can be sweet, but managing your daily expenses can be strenuous. A budget will relieve the stress and make it easy for you to see where you’re spending money. Let’s assume you make the same as the average young professional, at about $44,000. Below is an example of how you might budget that income.
Sample Budget for People in Their 20s
| Expense or Income | Amount |
|---|---|
| Total Income | +$44,000 |
| Rent | -$12,400 |
| Utilities and Bills | -$1,200 |
| Debt payments | -$1,800 |
| Food & Groceries | -$6,000 |
| Entertainment | -$3,600 |
| Transportation | -$1,200 |
| Healthcare | -$2,400 |
| Emergency Fund | -$1,200 |
| Total Remaining | $14,200 |
Financial Planning Resources for People in Their 20s
In your 20s, you are your own financial planner to some extent because you will have your own financial goals, credit history, financial habits, and personal finances. No one can advise you better than yourself, which is why you need the ideal financial resources to help you make the right financial decisions. Below are the top financial resources to assist you with this.
Financial Classes for People in Their 20s
- Future Rich. This is an online class from Planancial that teaches personal finance and provides a fun learning experience with videos and a workbook. You can learn strategies that will help you cultivate good habits and improve your finances by avoiding needless costs, risks, and credit card debt.
- Personal Finance for Young Adults. Financial planning is a personal topic, and this class will help you fix behaviors that are damaging your financial life. You will learn how to reduce and eliminate debts, free up your time for things that really matter, save and invest the right way, master your money, so you don’t have to be its slave, and increase your income. The class can be assessed on Udemy.
- Financial Planning for Young Adults. This Coursera class will introduce you to basic financial planning concepts. It is designed in partnership with the Certified Financial Planner Board of Standards. The class covers topics like financial goal setting, budgeting, financial risk, borrowing, and credit.
- Personal Finance Planning. In this edX course, you can learn how to manage your finances and make better financial decisions. You’ll get acquainted with emergency funds, retirement savings, credit scores, investment strategy, and retirement planning.
- OppU. This class is provided by the financial arm of OppLoans. It consists of four modules on budgeting, debt and loans, spending, and credit.
Financial Planning Books for People in Their 20s
- The Warren Buffett Way. This book will teach you how to invest, take big risks, and learn how to make money on the stock market. The book teaches you how to take advantage of bonds and stocks using illustrations.
- Why Didn’t They Teach Me This in School? This book teaches young adults how to take control of their finances. It discusses spending, income, and saving in an informative way.
- Rich Dad, Poor Dad. Reading this book will give you a better understanding of the faulty relationship many young adults have with money. It will help you start a successful financial journey by creating multiple streams of income.
- The 4-Hour Workweek. Whether you’re still in college or have already started your career, this book will be one of the most inspiring personal finance books you’ll ever read. It will teach you financial principles which are easy to relate to and apply.
- The Financial Diet. This book is well written and beautifully designed by financial experts to teach and inspire you to adopt a better relationship with money. The examples and stories shared are authentic and relatable.
Financial Planning Software for People in Their 20s
- Quicken. This software creates a budget for you according to your income and manages your savings. It also prioritizes your purchases, tracks your debts, and provides a retirement planning solution for you. It has a free and paid package, respectively.
- eMoney Advisor. This app comes with tons of financial planning tools, such as advanced financial planning analytics and marketing services that can be helpful to your company. It comes in both a paid and a free version.
- WealthTrace. This software will help you to plan for your retirement and give you insight into how to reduce your financial risks.
- You Need a Budget. This is a budgeting platform that will force you to get your finances on track by putting your money into tax-friendly accounts and breaking down your expenses and cash flow.
- Personal Capital. This is known as one of the most comprehensive personal finance apps. It provides services such as budgeting, cash flow, and investment analysis. It also includes access to a net-worth calculator and personal advisors.
Meet Your Financial Goals in 2022
Many people in their 20s find it difficult to manage finances and climb out of debt they may have incurred from college. But the tips and resources for people in their 20s listed above can help you a great deal. Practicing financial planning will help you establish self-discipline and instill within yourself good financial habits.
Financial Planning for People in Their 20s FAQ
Financial planning is important in your 20s because this is the time when you’re building the foundation of the rest of your financial life. If you fail to create a financial plan at this time, you’ll likely end up spending your money without restraint, thereby falling into debt.
The most important part of financial planning is budgeting. If you feel like you’re not making enough money to meet your basic needs, consider getting one of the best side tech careers of 2022.
Most financial apps are secure, but not all. It depends on where you download or access the program from. You should also be sure to create secure passwords and be careful where you input your personal information.
You can update your budget whenever you come into more money, for example, if you get a raise at work. You can also rebudget when you reach a certain financial goal.
