If you don't have much extra money after paying your bills, don't focus too much yet on saving 20% of your income. Your real goal is to learn to live on less than you earn and save the rest.
How to save money at age 25
Even if you can only save 5% or 10% of your income, that's still a good start if you can commit to increasing that percentage as your income goes up. Follow these tips to boost your long-term savings rate:
Build your emergency fund first
Your first priority is to save three months' worth of living expenses in an emergency fund. That's money that you keep in a savings account, not the stock market, so that you can quickly access it if you need it.
Eventually, you should have six months' worth of emergency savings. But once you're at three months, you can focus on another financial goal, too. For instance, you could put half of your extra money toward emergency savings and the other half toward investing or paying off debt.
Pay off credit cards before student loans
Unless you have private student loans with unusually high interest rates, you're probably paying the most interest on any credit card debt you're carrying. Focus on paying off credit cards first and then tackle those student loans.
If you have federal loans, take advantage of the automatic forbearance that remains in effect going into 2023. Put your loan payments toward credit cards and private student loans that are still accruing interest.
Even if you don't have other debt, consider putting the amount you'd currently be spending on federal student loans into a savings account. Since your loans aren't accruing interest during this automatic forbearance period, it makes sense to hold off on paying them, especially as President Joe Biden's plan to forgive up to $20,000 worth of federal loans per borrower remains in limbo.
