Tips For Financial Planning In Your 20's
Most twenty-somethings can relate to the idea of “figuring things out.” Whether you are exploring career paths or Googling what you need to apply for your apartment, most of us didn’t get a crash course on being an adult.
One thing that most people struggle with when in their twenties is money. Most of us don’t get taught money management tips in high school or even college, leaving us to figure things out on our own.
You’ve already taken the big first step towards financial independence and literacy — which is research. We aren’t all equipped to be perfect at personal financial planning, but we need to start somewhere. We here at Extra believe that just because you are young doesn’t mean you can’t take control of your finances!
We’ve rounded up our top financial tips for twenty-somethings who want to understand financial planning, but just don’t know where to start.
Create a Budget
There is no shame in living on a budget. A budget is the only way to know how to manage your money effectively. Once you start making that bread, it’s important to know just how to slice it.
Without a structured budget, it can be easy to overspend. We all know that spending money is a lot easier than saving it. That’s why budgeting is easier said than done.
To help yourself, stick to your budget with a solid but doable game plan. Budgeting allows you to know where your money goes and shows you just how much your morning lattes add up. When you budget your money correctly, you can save for significant moments in the future, like buying a house or a new car!
If you don’t know where to begin, check out our Budgeting 101 guide.
Deal With Your Debt
Student loans are a harsh reality that most recent college graduates face. In 2019, about 62% of college seniors who graduated from public and private nonprofit colleges had student loan debt, owing an average of $28,950.
Unfortunately, unlike your midterm studying, student loans aren’t something you can procrastinate on. Letting them sit only allows them to grow. For student loans and any debt you may be tackling, create a repayment plan. Having a solid repayment plan can help you avoid the consequences of interest rates.
Extra Tip: If you have a federal loan, sign up for automatic debit through your federal loan servicer to have your payments automatically taken from your bank account. This will give you a 0.25% interest rate deduction!
Set Your Financial Goals
To reach your goals, you need to know what they are. You can start by setting short-term goals and then work your way to mid-term goals and, lastly, fill in the long-term goals. For example, a long-term goal can be buying a house, while a short-term goal can be saving for an emergency fund. Good financial planning starts with setting realistic goals for yourself, allowing you to prioritize the things you really want.
Big financial goals aren’t going to be achieved overnight, so it’s essential to gain perspective on how much your goals will actually cost and how long it may take you to get there.
Start by estimating how much money you will need for each goal with specific dollar amounts. While this may seem overwhelming, keep in mind that you have years to save for your financial goals, and starting early will make an enormous difference.
It’s Never Too Early For Retirement Saving
Retirement may seem like a lifetime away when you are in your 20’s but starting to plan early can set you up for success in the long run. When it comes to compound interest, the sooner you start saving, the less principal you’ll have to invest.
Some companies offer to match all or a portion of your 401(k) contribution, which can lead to major gains. If your company doesn’t provide this or you work for yourself, don’t worry; there are other retirement plans.
It’s totally ok to start small, many twenty-year-olds are dealing with paying off debt. You can always increase your retirement contribution with an increase in income and a decrease in debt!
Use A Debit Card
A debit card takes money out of your checking account, meaning that it takes from the money you actually have. On the other hand, a credit card allows you to spend money you might not have and instead borrow it from your bank, racking up a ton of interest and even jeopardizing your credit score. When you make a late payment on your credit card, it can negatively affect your credit score!
When we say “debit card,” we don’t just mean any old debit card. We mean Extra. Extra is the first debit card that can help you build credit. Extra is the perfect secret weapon for any twenty-something looking to stay on track with their financial plan.
Extra works by bringing you the regular benefits of a debit card (no interest, no hidden fees, no credit check) and a credit card (rewards and the ability to build credit. Check out how Extra works, giving you the best of both worlds.
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