Your 20s can be an energizing time in your life as you navigate friends, love life, and career paths. Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn’t paying you enough, you’re struggling to make rent, have no savings, and are being crushed by debt.
If this sounds like you, there are ways you can reverse a downward financial spiral and meet your long-term goals. Here are some essentials to follow so that you can navigate yourself out of your 20s and into your 30s with your finances under control.
Set realistic goals for the present. Maybe you’re looking for a new job that will pay better. Whether that job comes sooner or later, setting strict but realistic goals for your present lifestyle can help get you back into the green. This means you might have to try living below your means for a short while, which can be tough, but well worth it in the long run.
Create a budget. The first thing you should do is look at all your monthly expenses. Carefully tracking your purchases and expenses can be arduous, but if you notice you're spending too much every week on fancy green tea smoothies, it might be time to start making them at home. Budgeting allows you to self-correct your spending habits, so you can pay for your next auto loan or utility bill. There are also different ways to budget. For example, the 80/20 is designed so that you put 20% of your income toward savings and the rest toward your monthly expenses—ideally, 50% toward necessities and 30% toward recreation or personal use. Explore various budget methods, so you can find the one that works for you. There are also free budgeting apps that are convenient and easy to use.
Make a savings account. Everyone knows it’s important to save money, but that doesn’t mean everyone does it. While it can be a struggle, it’s the best way to ensure a financially secure future. Whether it’s a job loss or a medical emergency, hard times can hit at any moment. But having a nest egg to fall back on can help keep you from stumbling too hard. That’s why creating a savings account that serves as an emergency fund is important. It’s meant to be a fluid account, so even if you dip into it occasionally, that’s okay because you’ll build it back up.
Keep your credit score up. Experts advise checking your credit score annually. But the best way to keep your credit score in pristine condition is by paying back loans and your bills on time. Going beyond the 30-day grace period means your credit score will take a hit and you’ll be less likely to get that loan or apartment you want. Of course, if you don’t have credit, now is the time to start building. While opening a credit card can be a great way to do that, you’ll want to pay it off each month. Otherwise, you could be creating more debt for yourself.
Get credit counseling. If you’re overwhelmed by debt, making an appointment with a credit counselor can be a great first step to getting that under control. A credit counselor will work with you on your budget, and if you qualify, may advise a debt management plan. This is where a credit counselor works with your lenders to lower your interest rates and consolidate your loans into one affordable monthly payment, so you can pay it off in three to five years.
Whether you get credit counseling or manage your own budget successfully, embracing financial literacy and taking control of your budget will ultimately help you decide your next step on your life path—without the gloom of debt hanging over you.