6 Smart Money Moves to Make in Your 20s

When you’re in your 20s, you’re likely in charge of your personal finances for the first time in your life. If that’s the case then you stand to benefit (sometimes significantly) by making wise choices about what you do with your hard-earned income.

Here are 6 smart money moves to make in your 20s.

1. Set up a Budget

One of the best things you can do early on when it comes to handling your own finances is to set up a budget. That’s because a budget will teach you the discipline to live within your means and not spend frivolously. It’s also a great way to ensure that you’re saving (because that should be an item in your budget).

To set up a budget, collect your monthly expenses and income. Then, plug it all into a spreadsheet and allocate a certain amount for each item.

Keep in mind that, if you’re having trouble making ends meet, you’ll need to do one of two things: increase your income or decrease your expenses. Since it’s usually much harder to decrease your expenses, it’s best to look for additional income.

2. Buy Insurance

Unless you’re a young adult covered by military insurance or your company is providing insurance for you, then you’ll need to buy own insurance. That includes health insurance, life insurance, car insurance, and homeowners or renters insurance.

If you avoid loading up on insurance and you’re hit with a massive expense item like a medical emergency, car accident or house fire, you could end up owing a lot of money that you’ll be paying for the rest of your life.

3. Have a Debt Relief Plan

Chances are pretty good that you’ve got some level of debt. If that’s the case, you should set up a debt repayment plan so that you can get out of it. Make sure that debt repayment is an expense item in your budget and that you’re fully aware of how long it will take to pay down the debt based on the amount you’ve budgeted for debt relief.

4. Take Advantage of Your 401K

If you’re working for a company that offers retirement benefits, you should take advantage of that plan to prepare for your sunset years.

For example, if you work for Safeway, then you should contribute part of your income to the Safeway 401K. That’s money you’re putting away for retirement that will multiply over the long haul.

5. Have an Emergency Fund

It’s often the case that young people don’t bother setting up any kind of savings plan. Avoid following their example.

You should always have some money set aside for “a rainy day.” That way, if an unexpected expense comes your way, you’ll be ready.

6. Have Your Financial Documents Handy

As you get older, you’ll find that certain pieces of paper are very important. As a result, you should have them in a fireproof box in your own house or apartment so that you can access them when you need to.

At a minimum, you’ll need your birth certificate, your Social Security card, and any other official IDs. Also, keep your tax returns handy because you’ll need them in the future if you want to get a mortgage or other hefty loan.

You have your whole adult life ahead of you. Be sure that you make smart decisions about your money while you’re in your 20s, and you’ll reap the rewards for decades.