If you feel lost when it comes to money management, don’t worry, you’re not alone.
We know as well as anyone that it can be hard to figure out how to manage your money, ways to save money (especially when it feels like you barely have any), and even how to make sense of all the random financial tips that come up on your Tik Tok for you page.
It may feel like everyone is steps ahead of you when it comes to financial knowledge, but trust us we’ve all been there.
Keep reading to learn 10 things all 20 year olds should know when it comes to money.
#1. Make a Budget
The importance of knowing how to budget, creating a budget, and then sticking to a budget cannot be overlooked. Think of a budget as directions for your money so that you get to where you want to go—whether that destination is a nice summer vacation, retiring your parents, buying a home, saving for your kids' education, or building a safety net for your future.
Budgeting is how you get there. To make a monthly budget, you’ve first got to know what your monthly income is. Then, you need to figure out your fixed expenses (These don’t change from month-to-month) and irregular expenses (Do you run out of skin care products every 3 months? That’s an irregular expense that you can account for).
Then you basically want to give every single dollar in income a job. Some of it of course will go to those expenses, some of it should go to savings and investments, and some of it could be donated to causes you care about or used to treat yourself.
Want to learn more about budgeting? Check out our post on budgeting for beginners.
#2. Pay Your Debts Back (Early & Often)
Debt can be one of the biggest drags on your financial future. Because let's be honest, it’s much harder to hit your savings goals when you’re paying someone else money every month.
Here’s the thing, ignoring your debts (especially your credit card debt or student loan debt) won’t make them go away. So, if you’re feeling overwhelmed with paying them off yourself and don’t know where to start, meet with a financial advisor at your local bank or credit union and make a plan to pay your debt off.
The #1 rule of debt? Do your best not to let it build up and try not to borrow more than you can afford to pay back.
#3. Set Financial Goals
Whether you want to go on vacation in a few months and pay for it all in cash or buy your parents their dream home one day, set some financial goals (and put them somewhere you’ll see them often).
Financial goals will give you something tangible to work toward which will make saving and managing your money easier because you’ll know where you’re trying to go.
Of course, the hard part might be getting there, but at least you’ll have a sense of direction.
#4. Decrease Your Fixed Expenses
We covered fixed expenses a bit earlier when we talked about budgeting, but let’s break this down a bit more. Your fixed expenses are the expenses you have that stay pretty much the same every month like your rent, cell phone, or health insurance bills.
If you can, you should try and lower them so that you can use more of your money to save for your future or treat yourself in the moment.
Consider getting a family plan with friends or asking your insurance company if they can lower your premium. You’ll never know what’s possible until you ask and isn’t your bills being reduced worth a potentially awkward conversation or two?
#5. Seek Our Financial Education
Yes, personal finance should have been taught to you in school. But, it probably wasn’t. So, unfortunately, you’ve got to put in work and educate yourself. The good thing is we live in the age of information which means it’s never been easier to learn something new or get a question answered.
If we could offer one tidbit of advice here? It’s great to listen to people on TikTok but make sure you’re doing your own research and also seeking out information from credible sources or licensed financial advisors.
#6. Figure Out How to Check Your Credit Report
Your credit score is so important to your financial life. Embarrassed to ask: what’s a credit score? We got you! Here’s a quick overview:
- It’s 3 numbers that banks and lenders use to guess how risky it is to lend you money.
- Use a tool like Credit Karma to check your credit score.
- Learn what affects your credit score.
- Watch out for gossip about your credit score that isn’t true.
Knowledge is almost always power. And that statement couldn’t be more true when it comes to credit.
#7. Compound Interest is Powerful So Take Advantage of It
The earlier you start saving money, the better. Put your money in a high-yield savings account (they have higher interest rates on your savings) or some investments that you feel comfortable with and leave it there. The interest you gain will compound as the years pass by and soon that $10 you started with will be $15,000.
If you’re late to the saving or investing game, don’t worry about it. You might want to consider setting aside more money, but literally any contribution you make is better than nothing. If you can only afford to set aside $5 a month, do that.
Your future self will thank you and you can always increase what you save as your income increases. But, you can’t get time that you should have been saving back so start early and save often.
#8. Consider Having More Than One Checking Account
Having more than one checking account might make managing your money a bit easier. You can have one account where the money you need to pay your bills every month goes (hello autopay!). One account for irregular expenses like your Sephora purchases every few months or when your car inevitably breaks down.
Maybe you have an account that you share with your partner and another of your own where you keep your own money. Either way, having multiple checking accounts can’t really hurt. Just make sure you don’t get locked out of any of them because you mixed up the passwords.
#9. Know the Difference Between Debit and Credit Cards
Did you know that debit and credit cards are different? And hitting credit when making a purchase with your debit card doesn’t help build your credit.
Debit and credit cards are both useful depending upon your financial goals and what purchases you have coming up.
Use your debit card when you want to avoid interest charges, debt, and stop overspending. Use your credit card when you want to improve your credit score, avoid overdraft fees, and earn points on purchases.
Or at least, that’s how it used to be. Now, you can use EXTRA. We’re not only the first debit card that helps you build credit, but we also have a rewards store.¹ Extra helps you track your purchases, build credit, and earn reward points on every purchase.¹
Check out this blog post on how EXTRA works to learn more.
#10. Build Your Emergency Fund
Life is unpredictable. Emergencies happen. You want to be able to cover them without having to run up your credit card bill or borrow money. Set aside money for emergencies. Just do it. Whenever you get paid, put whatever you can afford into an emergency fund that you don’t touch unless it’s a genuine emergency.
Just do it.
We hope you feel like you have the information you need to start thinking about your financial future now. Managing your money isn’t always easy, but it does get easier the more you do it. Money management is for sure an area where practice makes better, even if you never get “perfect” at it.