Top tips for managing money in your 20s

Managing money in your 20s means learning to take risks while you dream up your future.

Your 20s is the decade to take some risks. Because whatever happens, you have the most amount of time possible to recover.

As you get older it becomes harder to take risks and bounce back if they fail.

In your 20s it’s also okay to change your mind and change the angle you’re taking in life. You might start your 20s at uni and realise you absolutely hate it – good on you for figuring that out! Go forth and find what fits in your corner. What inspires you, what gets you excited and where do you see opportunity?

Don’t judge yourself and give everything a go.

Once you’ve dreamed it, you need to fund it. So start planning now and take these tips for managing money in your 20s, so you won’t have to work so hard at it in your 30s, your 40s and beyond.

Save an emergency fund

Set up a separate bank account and lock away an emergency fund in case crap hits the fan.

Those who had an emergency fund ready before COVID hit were so much better supported. They knew they had a safety net of cash to help them if they lost work.

Anything could happen, so be ready. Choose the amount you want to put away and go hard at stockpiling that amount to start with. Once that’s done, get to work being clear on what you’re aiming for in life.

Be clear about what you want to do

Even if you’re clear that you aren’t clear lol.

At least you know and you can start to make steps towards figuring out what you want, what motivates you, and what you’re aiming for.

Talk with a friend or a trusted family member, brainstorm ideas, do some online research, try a bunch of stuff and see what sticks. If you hate something, don’t do it. Be open and don’t be afraid to make mistakes – your 20s are the best time to make them. Keep your cash flow flexible and agile so you can adapt

When you’re managing money in your 20s, plans have a way of shifting last minute. That’s because you’re coming across heaps of new opportunities. If you’re tied down with debt you can’t jump on that new job offer overseas, or that move across the country to study that amazing course.

Be on your toes and make sure your cash can set you up to make the moves you want to make.

Stay out of consumer debt

Credit cards, personal loans, Buy Now, Pay Later schemes – danger zone!

Don’t move out of home and buy a new $1500 couch on an interest-free loan. Next week you might decide you want to move overseas and what happens with that loan? It follows you everywhere choking your cash flow.

Pay for things with money you actually have. Don’t tell yourself that tomorrow you’ll pay it off – you won’t.

Watch out for lifestyle inflation

FOMO! YOLO! Bling bling baby!

If you get a pay rise, or maybe your first professional job which pays better than your part-time uni café gig did, don’t go on a spending spree! Just because you earn more, does not mean you should spend more.

Use that cash and save (or invest) more.

Audit your expenses every so often and trim the fat – random things will creep in as your income increases so keep your eyes peeled.

Also, don’t be embarrassed if you’re choosing to keep things simple and keep driving that basic car. If it works and it’s safe, you’re winning.

Save as much as possible

Especially if you live at home.

Choose a savings goal and you’ll save so much better. You won’t be afraid to make trade offs.

Pick a percentage of how much you want to be saving from your pay each week or fortnight and automate that. Check out my Glen James Spending Plan if you need a structure for this or aren’t sure how to set this up. Whatever good practices you set up now will carry on for the rest of your life.

Think of your savings as “paying yourself first” – so prioritise you and your cash goals.

If saving is hard, become a good investor

I suck at saving – give me $10 and I’ll spend $50. So I choose to shift my mindset from ‘save save save’ to ‘invest invest invest’.

I automate my cash so I can’t get in there and mess up the rhythm. For me it was super helpful thinking of my money as something that isn’t just going to sit there and gather dust, but rather something that’s working harder to grow for me and my goals.

If you’re like me, look into your investing options and keep the cash working hard. And keep it away from you!

Keep your living expenses as low as possible

This is particularly important if you’re moving out for the first time as that’s when expenses really jump.

Try to keep your basic needs costs down – don’t rent some amazing beachfront penthouse when you could rent a few streets back and save hundreds of dollars.

Get the best deals on electricity and gas, and shop around for internet offers. Stick to the essentials and get thrifty! What’s the point of managing money in your 20s if you’re just going to let cash leak through your fingers?

Search Facebook Marketplace in affluent neighbourhoods for your share house furniture. Don’t be ashamed to go second hand – in fact, rub your second hand shopping skills in people’s faces!

Don’t spend money to please other people

You’re an adult now – make decisions for yourself, not based on someone else’s expectations.

Listen to the advice of others with humility, but act on the things that are right for you.

If a decision you make doesn’t work out, don’t stress – own it and change it moving forward. You might hit a few roadblocks before you lock into what you really want, but that’s adulting peeps!

Seek the advice of professionals

Use the power of the professionals out there!

Use the advice, knowledge and skills of people like accountants, financial advisers and mortgage brokers – they can speak directly to your goals and situation to set you up for success.

Watch out for armchair experts! Talk with someone who knows what they’re doing, and you’ll be walking away with practical tips and plans that’s tailored to you.

Have the mindset that nothing is wasted

An important part of managing money in your 20s is understanding that you’re just at the beginning. If you end up changing from being a social media marketer, to creating your own pottery designs and selling at local markets, to working in the defence force, who cares?!

Go for it!

Write down what you’ve learnt in all of those positions. What skills or experience did you gain, and how will you use it to inform what you do next?

Try to smile on whatever jobs or training you’ve done – take the gold away from it, and don’t let yourself feel like it was wasted time, or a wasted opportunity.

Use any skill you gain in what you turn your hand to in future, it’s never wasted.

You won’t be CEO tomorrow, soz

You will have to do the hard yards of being a junior, making coffee for the office, spending hours filing documents, and setting up meeting rooms before you wear the big suit.

There is due process that everyone must walk through to gain the basic skills to be a good and hard worker – someone that’s useful and understanding higher up.

These skills are built upon year after year.

Even if you’re working under someone who is a jerk, that’s a way to learn what not to do when you get in that position. Be professional, be willing to learn, be open and don’t be a jerk.

Don’t beat yourself up if you make a mistake

You’ll make mistakes. We all do. Don’t beat yourself up.

Take away the good stuff from the things that fail, and forget about feeling crappy about yourself. No one is perfect, and very few people get things right the first time. You have time!

More in this series:

• Top tips for managing money in your 30s
• Top tips for managing money in your 40s
• Top tips for managing money in your 50s

This is an edited version of an article that originally appeared on My Millennial Money. This article contains general information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances and issues.