13 Money Moves to Make in Your 20s

In your 20s, you have a valuable resource that older generations envy: time. No matter what your financial status is today, you have time to create the financial life you want. That includes building massive wealth in the stock market, retiring early, and then living a life of leisure. Use your time wisely and no financial goal is too big.

Here are 13 money moves to make in your 20s if you're serious about reaching financial independence sooner rather than later.

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Building enough wealth to retire comfortably takes decades of saving and investing. By starting this process in your 20s versus your 30s, you can double the wealth potential in your retirement account.

Here are some numbers to demonstrate the value of contributing to your retirement account 10 years earlier. With a market-average annual 7% growth rate, investing $500 monthly for 30 years builds to an ending balance of about $570,000. Extend that timeline to 40 years and the ending balance shoots up to $1.2 million.

Start investing for retirement now. It's a no-brainer.

ALSO READ: How Much Should You Contribute to Your 401(k)?

Investing in stock or stock funds is the simplest way to build retirement wealth and achieve financial independence. As noted earlier, you can retire a millionaire if you start investing $500 monthly in your 20s at an average annual growth rate of 7%.

That growth rate aligns with the long-term, inflation-adjusted results of the stock market as a whole. You can expect similar performance by investing in a broad-market fund with low fees.

You cannot expect that type of growth in a cash account, however. High-rate cash accounts right now are yielding 1% to 1.5%, which is not enough to make you a millionaire retiree.

At the start of your career, it's tough to pay your bills and save for your short- and long-term financial goals. Fortunately, your income potential only goes up from here as you find your niche and gain experience in the workforce.

To minimize career detours and shorten your rise to the top, plan out your career path now. Research higher-level jobs in your field so you know the necessary qualifications. Then decide how you'll gain the education, experience, on-the-job responsibilities, and titles that stand between you and your top income.

ALSO READ: This Six-Figure Career Path Is Booming Right Now

You may be living paycheck to paycheck now, but that's not a sustainable lifestyle. Save money to a cash account and start building your emergency fund. You'll use the emergency fund for insurance deductibles and other unexpected expenses.

If possible, direct 5% of your pay into that cash account. Continue with that habit until your balance is enough to cover six months of your living expenses.

When you know how to create a budget and live within it, you can reach any financial goal you set. Don't put off learning these skills -- because they will benefit you for the rest of your life.

Start by tracking your expenses in whatever form works best for you. It could be an app, spreadsheet, or pad of paper. After you compile a few months of data, you'll know where your spending weaknesses are.

Use the budget to challenge yourself. See how much you can trim your discretionary spending. You'll likely find it's not as hard as you expected.

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Like budgeting skills, a good credit score has lifelong benefits. A history of managing credit responsibly gives you access to debt at competitive rates. As a result, you'll pay less on car loans, home loans, and business loans. The lifetime savings associated with a good credit score versus a bad one are substantial.

For example, say you borrow $400,000 to buy a home. That loan amount financed at 5.5% over 30 years will cost you about $418,000 in interest. A higher rate of 6.5% on the same loan raises total interest by nearly $100,000 to $510,000.

The takeaway? It pays to have a good credit score.

ALSO READ: How to Build Credit Fast

The right way to use a credit card is to repay the entire balance each month. That way, you avoid high interest charges that increase your balance.

Unfortunately, using a credit card this way doesn't come naturally for most of us. It takes practice, discipline, and possibly a few slipups. Start flexing these muscles now.

Your budget will be critical in this effort. If you hold spending within your set limits, you should have the cash to pay down your balance each month.

Your student loans should pay for themselves over time as your salary rises. You can keep their total costs down, though, by paying off that debt as quickly as possible.

Eliminating student loan debt is great for your credit history. It also frees up cash in your monthly budget and empowers you to pursue other financial goals, like buying a home or starting a business.

Note that if you must choose between prioritizing the pay down of credit cards versus student loans, your more expensive credit cards usually take priority.

ALSO READ: How Fast Should You Pay Off Your Student Loans?

Now's the time to set short- and long-term financial goals. Think about the financial milestones you want to reach over the next year, five years, 15 years, and 30 years. List and prioritize them.

Next, revisit your budget. Trim back your spending limits as needed to create room to save for your top-priority financial goals. It might help, too, to open an account with a bank that supports saving to specific goals. You can do this with Ally Bank's Bucket feature, for example.

The financial benefits of homeownership are significant. When you buy a home with a fixed mortgage, your house payment doesn't change -- assuming you don't refinance. You can't say the same for rents, which are subject to inflationary increases.

Homes are also assets that appreciate while you live in them. Saving up the value locked in your home can provide tons of financial flexibility in your senior years.

Note that you don't have to buy an expensive home to realize these benefits, either. You might see more upside from a budget home you can fix up over time versus new construction.

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When you're first starting out, it's natural to expand your lifestyle as your income increases. But sometime in your 20s, you'll want to cap that trend. If you don't, you could find yourself making six figures and still living paycheck to paycheck.

Hold your lifestyle steady, and you can use your income increases to support your top financial goals. You might use a 10% raise associated with a promotion to pad your home down payment fund or your early retirement account, for example.

ALSO READ: This Trend Is Quietly Derailing Your Retirement

Passive income reduces your dependence on working for a living. If you start building passive income streams now, you could enjoy tons of financial flexibility later in life.

There are various ways to cultivate passive income, but stable dividend stocks are among your best options. Dividend stocks are easy to buy and lower maintenance than, say, starting a side hustle or investing in real property.

The primary disadvantage is the time it takes to build a big dividend portfolio. You can overcome that by starting early -- like right now. Get in the habit of investing monthly and watch your portfolio grow over time.

ALSO READ: How to Generate $1,000+ in Passive Income Each Month

When do you want work to become optional? If you're on the traditional path, that happens in your 60s -- but there's no reason it can't be earlier.

Documenting an aggressive timeline for financial independence could be the most productive money move you make in your 20s. Having the plan in place keeps you focused. In moments when your financial resolve weakens, you can revisit your plan -- and imagine a life free of financial worry -- for a fresh dose of motivation.

Practicing responsible money management in your 20s fast-tracks your wealth progress. The basic tenets are easy to remember. Live within your means, pay off debt, and invest in appreciating assets. It really is that simple.

Master those skills now and you'll be well on your way to creating and living your best financial life.

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