Money strategies in your 20s

23 Mar
Personal finance in your twenties

Money strategies in your 20s

You’re probably sitting somewhere thinking about your homework or an upcoming party.  Financial investing is probably the furthest thing on your mind.  I’m here to tell you that it’s time to think about your finances and build money strategies to guide you through your 20s.

You’re going to make hundreds of decisions in your 20s that will define your financial strength down the line.  In this article I’m going to share some tips to get you on the right foot.

On the bottom of this article, find a free checklist to print out and carry with you as you find yourself making important financial decisions.  Share this article with friends and family members to benefit from the valuable tips.

To go, or not to go: that is the question!

Money Strategies in Your 20s - College or not

The first and biggest financial decision you make in your twenties is whether you go to college or not.  Of the 5 million high school graduates in 2015, 69% enrolled in a college by the following October¹. The average yearly tuition for in-state public colleges runs at about $10,000 in 2017./18². College is a serious financial decision. As such, you should evaluate the benefits and disadvantages.  Here is the most important question you should ask yourself, “what career interests me the most and which, if any, major is required for that career”.  Then conduct the following research.

  1. Evaluate the starting and average salary for your selected career.
  2. Determine the demand in your area.
  3. Identify your competition.

If the starting salary for your selected career (post college) is $35,000 and you plan to live in a metropolitan area, you’re going to be in a tight spot financially. Especially if you are going to be paying back student loans at the same time.

The reason I want you to identify your competition, is because it will tell you about the longevity and viability of your career.  Are jobs being outsourced in your field?  If your career is done primarily by freelancers, you’re going to face competition through global sourcing opportunities like  If you want a career as an illustrator, for example, you’re going to be competing with hungry illustrators who are willing to work for very little money.  Try to identify other careers that are as creative, yet more lucrative and which face less competition.

Exception to the rule: On a level of 1 to 10, your passion for the selected career is 15 AND you’ve already been paid for jobs in this field through several projects. In that case, your passion, understanding and expertise can significantly lift the starting salary beyond the average level.

I’m going to college!

Now let’s say you’ve decided  that college is the right path for you. The next financial decision is determining how to pay to pay for it. Unless your family is financially supporting you fully, you’re going to have to identify other sources of money. This could come in three forms:

  • student loans (federal, private, etc.),
  • scholarships, or
  • working part-time.

Working Part-Time

You can easily pay for one or two quarters of your tuition payments by working a part-time job while studying.  If you’re good at multi-tasking and staying focused, then you should take advantage of side jobs.  If you’re not good at it, then your twenties are the right time to develop that skill.

Jobs you can do part-time

  • On campus jobs – these are the best jobs! You get to work in close proximity to your peers and stay close to class.   A paid teacher’s assistant position, for example, will offer this flexibility AND also enhance your resume.  This, in turn, enhances your chances for a job after college.  Triple baaam!
  • Waitress / retail jobs – these positions are in high demand during the Holiday Season.  Maybe you’ll be working during the next Black Friday sale instead of shopping?
  • Jobs and internships in your field – if you’re a Computer Science major or similar, you may find large corporations recruiting for summer internship positions.  These pay a lot and significantly increase your chance for a job after college.

First job post college

first job post collegeYou’ve landed your first job and are making a decent salary.   What an exciting time!

Let’s review your lifestyle decisions, to make sure you’re still the right financial path.  Are you taking extravagant trips, purchasing designer clothes or buying a brand new car? Hold up!

Delay those items for another 2 – 3 years.  You’re still used to living like a student: your financial needs are low and your expectations are easily met.  Extend the student lifestyle and prioritise on:

  1. Paying back student loans.
  2. Creating a 6-month savings buffer.
  3. Investing (and maybe even) maxing out on the 401(k) plan offered by your company.

The first 2 – 3 after college

Here’s an example for how you could structure the first 2 – 3 years after college.

Sum up your monthly expenses:

  • Calculate your minimum financial loan payments using the Financial Aid Calculator Online.
  • Identify our monthly recurring expenses (rent, utilities, etc).
  • Add on special items like gym-membership, cell phone, car insurance.
  • Calculate a desired budget for food and entertainment.

Identify your monthly salary after Federal/State taxes and Social Security using the following Neuvoo Tax Calculator.

Subtract your expenses from your net income, to identify your monthly surplus. It doesn’t matter whether that surplus is $100 or $1,000, what’s important is that you learn how to use it.

For the first 2 – 3 years after college, I recommend to apply the 20/80 rule.  Use 20% of that surplus to shop, travel or do other things that make you feel good.  The remainder, goes to three financial accounts.  

The 80% of your surplus should be split as follows:

  • Use 1/3 to make additional student loan payments.
  • Save 1/3 to build a 6-month savings buffer for a rainy day.
  • Use 1/3 to pay into your company’s 401(K) plan.

Money strategies in your twenties savings

Financial result 3 years post college

  • After 3 years, you’ve likely paid off 80% of your student loans by making additional principal payments.
  • You’ve likely developed a 4-month savings buffer.
  • And you’ve invested a good amount in stocks through your company’s 401(k).  Good job making your money work for you!

You are now a a highly liquid twenty-something year old. Not only that, you have developed financial skills that will guide the rest of your life.

What happens after student loans have been paid off

If you’ve followed our recommendations above, you’ve probably paid off your student loans within 4 – 5 years after college, all while developing your career and building a savings buffer.  With monthly student loans out of the way, you have more money to play with and invest.

At this point, I recommend a 60% – 40% split between savings and 401(k) to quickly boost up your 6-month buffer.  This will likely only take 1 – 2 months, since you’ve been working on it along the way.  After that, you’re highly liquid, debt-free and are in a qualified position to take on more risky personal financial decisions.

Quit your job and travel for a while? Sure! Buy a home? Why not! Invest in a startup? Yes!

Late 20s and financial investments

Money strategies in your 20s - 5 years post college

Saving for a home

You have put the college (tuition) days in your past.  You’re a young adult with a prosperous career and are ready to make your second, large financial investment.

Your saving skills will pay off at this stage.

In the beginning of this article, I urged you to analyze the pros-and-cons of your college major.  You’ll need to take a similar approach with your first home.  Most likely, you will not stay in your first home for the rest of your life.  Your first home does not have to be perfect – and it likely won’t be.  What’s important is that it matches your budget AND that the value of the property appreciates over time.

Calculate the following to identify the right home for your budget:

If you put 20% as a down payment (leaving your 6-month savings untouched), could you pay principal, interest, property taxes and association fees? What percentage of your pre-tax income would it consume?

Tip: A good target is to keep your mortgage payment below 30% of your pre-tax monthly income. 

Other investing choices

As a highly liquid and debt-free individual with a good income, you have many opportunities to invest.  Besides purchasing home, you could consider the following alternatives:

  • higher education (MBA or Executive MBA),
  • investing in startups,
  • investing in a Roth IRA and maximising your 401(k), or
  • building a startup.


Your 20s are exciting and adventurous!  You should enjoy every moment.  Yet, super lavish choices, which may seem exciting for a week or two, can severely put you behind financially and create unnecessary stress down the line.   Use our tips to develop a healthy balance between finances and fun to make the most of your 20s!

Personal Finance Strategies in your 20s

Money Strategies in Your 20s Pinterest



Money strategies in your 20s
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Money strategies in your 20s
Your 20s are exciting and adventurous!  You should enjoy every moment.  Yet, super lavish choices, which may seem exciting for a week or two, can severely put you behind financially and create unnecessary stress down the line.   Use our tips to develop a healthy balance between finances and fun to make the most of your 20s!
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