Hello Smart Money People,

I often get asked what should people focus on regarding money in their 20’s. It is a good question and more people should ask it.

It is a hard question to answer simply because everyone is different, however, as that is not helpful, we can give you suggestions and you apply what is relevant to you.

In my 20’s I focused on nothing but having a good time, buying clothes, taking vacations and EATING OUT as much as possible. I encourage you NOT to do the same. Bill on the other hand, met me in his early 20’s, I am 5 years older than he, total sidebar, but he was, and is, a natural saver. Bill began saving from his first paycheck. He was investing in and saving outside of retirement.

Spoiler Alert: The bottom line is it is all about choices. When you have money in the bank and an emergency fund and no debt, you have CHOICES. When you are tied to a car payment, a house payment, a credit card payment, a job you don’t like because of all of your payments, guess what you don’t have? Choices.

Bill and I made different CHOICES in our 20’s. That lead to different decisions in our 30’s.

Here are some choices you can make during the second decade of your life that will set your path for you, in a good way or in a not-so-good-way. You choose. Like we did.

The 20’s:

  • If you’ve been reading along Smart Money People, you know I am going to say REGARDLESS OF YOUR AGE you need to have a BUDGET.

Budgets are a simple way of telling your money where to go and what to do. Like toddlers or puppies, money needs direction. In the absence of direction, it will be mayhem, like a toddler or a puppy. In order to train your money, you have to be trained. Know what your income is and live below it. Period. Know your fixed expenses. Know your variable expenses. Become so familiar with your budget that when you’ve spent all your grocery money for the week, you are clear you cannot go to the store.

  • Either you aren’t married, or are recently married and don’t have a lot of overhead yet. Therefore, you have a lot of surplus (discretionary income) in your budget. You need to SAVE as much as you can.

Saving sets you up for success and prevents big setbacks. An emergency fund (read emergency fund blog here) is the key to a good night sleep. A flat tire, covered, a doctor bill, got it, your mother’s birthday, a nice, small gift, done. Peace on earth for another year.

  • You need to be focused on your expenses and be cautious about debt.

There is so much chatter about student loan debt. The problem is we TELL YOU TO GO TO SCHOOL AND GET A GOOD EDUCATION. We make it easy to borrow money, a lot of money and most of all we tell you that you SHOULD do it.

Think about it. The average graduate makes $42,881 with $37,172 in student load debt, read about it here. The average student loan monthly payment is $351. Right out of the gate you have a rock in your shoe. Hard to run with a rock in your shoe.

I used to work with a gal, smart, really smart. She and her husband received their graduate degrees from at a TOP school in the country. Each owe $200k for their master’s degree. $400,000 for 2 graduate degrees. They live in an expensive part of the country and spend money because they deserve it. They worked hard. You do the math. They have a boulder in their shoes.

I URGE you to consider your future. Here are a few more things to think about:

  Here is some advice and tips I wish someone told me.

  • Pay down any debt you have.

If you do have debt, of any kind. Now is the time to obliterate it. Just get rid of it. Like it is a bad habit. Do whatever you can, as fast as you can.

  • This will require you to LIVE BELOW YOUR MEANS.

An interesting concept. Simply broken down live on less then you make, pay off your debt and save what is left over. I would even challenge you to decide what you are going to save, make it a stretch and see where you can cut out of your current spending to reach that goal. Every time we get uncomfortable and find a way, we get stronger in the “I can do this” category.

  • Save for a down payment on house.

As much as you can, minimally 20%, save as much as you can to put down on your house. Bill and I have not had a mortgage for 4 years. People say we are lucky, we caught a break, we are super disciplined. We are disciplined, but we were not lucky, and we caught no breaks. We didn’t do what everyone else was doing. Which brings me to the next important point.

  • DO NOT finance a car.

Just don’t do it. Buy a car you can afford from what you have saved. Period. When you save more, you can buy a nicer car. The bottom line is the car depreciates 20% once you drive away in it, so be smart. You can buy a fancy car when you have the money to do it. CASH.


Care less about what other people think of you. I believe it was Dr. Phil that said, “What other people think of you is none of your business.” Run your own race, live your own life, be your own Jones.

If you can do that in your 20s you will be so amazed at where your life can go and grow.

Up next. Your 30’s. Coming soon.

As always, wishing you the best! YOU CAN DO IT!!

Karen and Bill

2 thoughts on “How to handle money in your 20’s”

  1. Your first money is your most valuable money from an investment perspective. You should have some balance between saving and having fun. But there is room for both. The tragedy is when you only spend and don’t save anything, you miss out on all that compounded growth. If you don’t think you can save anything save 1% I guarantee you won’t miss it. Then increase by another percent. Make it automatic and in a few years you will be saving a decent amount and still have some money in your pocket to have a good time with your friends. When you get pay increases maintain your lifestyle and invest a big chunk of the increase. Your future self will thank you.

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