Your twenties are exciting years, full of big changes and all kinds of opportunities – finishing university or college, starting a full-time job, seeing a regular paycheque for the first time. Maybe you’re moving into your own place. Or, perhaps you’ve been working for a while and you’re ready to start setting some financial goals.

If you start making the right financial decisions now, you’ll get a head start on the road to prosperity. The most important thing to remember is time is on your side – you just need a bit of discipline. To build a strong and stable future you need to lay the foundation now.

Live within your means

Managing your finances for the first time can seem overwhelming. You discover that the cost of living is expensive what with daily expenses, rent payments, food and entertainment. You might have a professional wardrobe to purchase. You likely have student loans and one or more credit cards with outstanding balances.

Saving for an incredibly distant retirement may not even be on your radar.

This is the age where you want to impress – treating your friends to dinner and drinks, inviting your buds to watch the game on your new 84” TV, driving a flashy sports car. You risk overspending on discretionary items and under saving for big-ticket purchases.

The major key to financial planning is to live within your means. Create a budget and keep track of your spending. See if you find any areas of overspending where you can cut back.

Start getting good value for your money. Evaluate every purchase and make sure what you buy is worth the expense.

Invest in yourself

These days you can’t rely on receiving a steady paycheque every two weeks for thirty years, even in the most prestigious and well-paying professions. According to statistics, the average worker can now hold 10 different jobs between the ages of 18 and 36.

Instead, financial stability now comes from cultivating multiple sources of income, becoming more visible through networking, and developing marketable skills.

Hone your negotiating skills for your job interviews and practice asking for more money even if it feels awkward. Women especially often tend to take the first sum offered. Future raises are based on that initial conversation and can make a big difference over the course of your working lifetime.

When negotiating your salary don’t forget to consider benefits. Pensions and matching programs and various insurance benefits automatically increase the value of your salary package.

Avoid the debt trap

Many young adults get their first credit card as a student. Financial institutions make it easy to get credit and minimum payments are low. It doesn’t take long before your spending can spiral out of control. A typical university graduate carries a balance on one or more cards. Don’t get used to credit and running up consumer debt. It’s easy to live beyond your means. Be smart.

Your first step is to make a plan to tackle your debts logically. Pay your bills on time to avoid late fees and increased interest charges. If you can’t pay off your credit card balance every month, stop using it altogether.

Even student loans should be paid off as quickly as possible. Aim to have them paid within five to seven years.

Your ability to handle credit in your twenties can have a lifetime impact. You need to build up your credit history and earn a good credit score. Bad spending habits now can affect your future ability to get a car loan, mortgage, or even a job.

A credit card is pretty much essential since you need one to book a hotel room, rent a car, or buy things online. Compare cards to find the best deal for you. There’s no point in choosing a rewards card if you are carrying a large balance, choose a low interest rate card instead.

Savings: Start slow and start small

To be able to find money to save and invest within your tight budget may seem like an arduous task when earnings are low and needs are immediate, but young adults who don’t save are missing out on the powerful effects of compounding.

First make inroads into your debts and then set up a savings plan. Aim to build up a least one month’s worth of living expenses. Save for lump sum expenses throughout the year.

Make savings automatic whether your goal is short term or long term. We have a habit of underestimating small amounts. Even $50 a month will add up quickly.

Some employers offer RRSP or pension plans that automatically take the contribution right off your paycheque. Consider taking advantage of these plans if they are available, especially if there is any kind of matching done by your employer.

Become financially aware

Educate yourself about investing and financial products.

Do some research into your credit cards and bank accounts to see what fees you are paying and whether there are better options for you.

Protect yourself and your stuff. Look at disability insurance – at least workplace coverage, if available. Compare auto and home (or tenant’s) insurance rates and coverage. Don’t underinsure just to try and save some money.

What kind of investor are you? Aggressive? Risk-averse? Investing sites at many discount brokerages have online practice accounts where you can practice investing. You might start with mutual funds, ETFs or try your hand at stock picking to see what works for you. How well do you handle losing money? It’s better to find out now when your investing amounts are small and you have plenty of time to recover from any inevitable mistakes.

Books on finance for beginners:

Financial take away for your twenties: Manage your debt.

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7 Comments

  1. Gary on October 28, 2015 at 7:46 am

    I don’t know how many 20 to 30 year olds will read your post Marie but I hope any Dad’s and Mom’s will forward it to their children. My kids are in their 40’s; I keep telling them: “it’s not to late to start saving” — one listens and the other doesn’t. The one that doesn’t has a DOB pension thank goodness. If you only get through to one young person your post is a success!

    • boomer on October 28, 2015 at 9:03 am

      Thanks Gary. I know it’s never too late, but earlier is better. I’ll bet you wish you had a better handle on your finances when you were in your 20’s – I know I do.

      • Gary on October 28, 2015 at 10:18 am

        No kidding. We used to carry a clicker around the grocery store and when it got to $20. that was it! I wonder how many of todays young people have had to put things back at the cash register? No credit cards, LOC’s or debit cards with overdraft protection: just cash!

  2. Robert on October 28, 2015 at 10:46 am

    I like how the 20’s sound. I’d like to sign up for another go at them.

  3. Susan Joanne on October 28, 2015 at 12:04 pm

    That’s very good advice! Start saving. Just start. It is amazing how it grows and you don’t miss it. The other thing it is the 20’s who seem to want all the latest. Forever changing their phones, gaming, clothes, etc. Too materialistic! A credit card is important part of building credit but it is sadly abused. I have also found that good financial management runs in families. So keep having those conversations at the dinner table, driving to those sport events, etc.

  4. Big Cajun Man (AW) on October 28, 2015 at 12:34 pm

    Yeh, I agree with the commenter wishing to have another shot at the 20’s again, I think I bollocksed them up nicely. My 20’s were the 80’s though a period where we went from having 19% Internet CSBs to a massive stock crash in ’87, so not sure I would do that much better a job if given a second chance

  5. Helene Linka on October 28, 2015 at 9:33 pm

    I believe life gives you what you need when you need it, and the above post just confirmed this. My 26 year old daughter has moved to Saskatoon this fall, and is beginning her career as a chiropractor. After 8 years of post secondary education, she has to begin to work off her “good” debt and learn to manage her life. Your post will be sent to her with exhortations to please sign up for this site. Your advice is sage and timely each week. Thank you so much for sharing all of this.

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