You may not think of your 20s as a time to get serious about finances. After all, your 20s are when you're first starting out in your career, and you probably won't be earning nearly the same salary as when you're older. But believe it or not, your 20s are actually the perfect time to establish smart money-related practices. If you're in your 20s, here are some specific moves you'll definitely want to make.
1. Create a budget
Budgeting is one of the easiest ways to keep track of your spending and ensure that you're not going overboard in any particular category. If you really want to get your finances on the right track, map out a budget and review it every few months to make sure it's something you can actually stick to. If not, you may need to look at cutting some expenses to avoid debt or cripple your savings efforts.
2. Build an emergency fund
No matter how much you earn, one of the most important money moves to tackle is establishing an emergency fund. You never know when you might lose your job, fall ill, or encounter any sort of situation where you suddenly need money. Emergency savings can protect you from these and other unknowns, so start working toward the goal of amassing enough cash to cover three to six months' worth of living expenses.
3. Start saving for retirement
Though your emergency savings should trump retirement savings, once you have the former in place, it's time to start setting money aside for the future. If your employer offers a 401(k), be sure to sign up and contribute what you can -- especially since most companies that provide 401(k)s also offer some sort of matching incentive to participants. Don't have access to a 401(k)? You can still save in an IRA, and while you're currently capped at $5,500 a year in contributions, that's a more than respectable start to your nest egg.
4. Pay off costly credit card debt
Not only is credit card debt among the worst kind to have, but it's also usually the costliest. Any time you carry a balance on a credit card, you're automatically signing up to throw away money on interest -- interest that, in some cases, can compound daily, thus trapping you in a seemingly endless cycle. That's why it pays to do what it takes to rid yourself of credit card debt, whether it's cutting your monthly expenses to free up more cash, or working a side gig and using your earnings to chip away at what you owe.
5. Knock out your student loans
The average 20-something who borrowed money for college is on the hook for a monthly payment of $351 -- not exactly pocket change. The sooner you pay off those loans, the more cash you'll have available for other things, whether it's retirement savings or a near-term goal. If you're no longer carrying a costly credit card balance, focus on accelerating your student loan repayment plan so that your college debt is eliminated faster.
6. Save for a home
Though not everyone aims to own a home, if that's a goal of yours, it's critical to start saving as early as possible. While some folks make the leap into homeownership without having enough cash for a 20% down payment, going this route will open the door to private mortgage insurance, which will only add to your costs. Furthermore, while there's technically no such thing as being too old to buy a home, since most people take out 30-year loans, the sooner you sign your mortgage, the greater your chances of paying it off by the time retirement rolls around. Therefore, if your goal is to buy your home by age 30, you'll need to save some serious money in your 20s.
7. Create a will
You might think you don't need a will in your 20s, especially if you're single or don't have children, but ignoring this crucial estate-planning document is actually a huge mistake. Without a will, there's no telling who might wind up with your assets once you pass, limited as they may be. If you can't afford to hire an attorney for a will, you should at least look into creating one online.
8. Get health insurance
It's a frightening statistic that nearly 12% of U.S. adults don't have a health insurance plan. But even if you're the type who rarely gets sick, going without insurance is a risky financial move. Though you'll be savings hundreds of dollars each month by not paying a premium, the moment you get injured or hospitalized, you could wind up on the hook for thousands of dollars in bills. If you can't swing a more comprehensive plan, at the very least, buy yourself a policy that protects against catastrophic costs. You might face a hefty deductible and high copayments, but you'll at least somewhat cap your out-of-pocket liability.
9. Decide on graduate school
Going back to school can be a worthwhile move for your career, but it's one that comes at a cost. So the sooner you come to a decision about graduate school, the better equipped you'll be to make other financial choices, like whether to buy a home right away. Furthermore, while you typically have the option to borrow money for an advanced degree, grad school might also be the sort of thing you want to save for, so if you're certain you'll be going, work on putting money aside in advance.
10. Ask for a raise
Contrary to what you may have been led to believe, raises at work aren't always a given. Sometimes, you need to fight for that raise, and the sooner you do, the more you stand to benefit. Not only will scoring a raise put more money in your pocket immediately, but it'll open the door to higher compensation should you choose to move on to another company. And since you really have nothing to lose by asking, it pays to have that conversation with your manager.
The money moves you make in your 20s could pave the way to a lifetime of financial health. Take these critical steps, and you'll come to be thankful for them later on.