3 Best financial decisions to make to increase your success in your 20s

Your 20s can be a strange decade, encompassing everything from graduating college and moving away from your parents to getting a job and probably making the most money of your life.

But for Gen Z and younger Millennials, figuring out exactly what to do with your paycheck can be stressful.

It’s great to live in the here and now and enjoy your newfound independence, but your 20s are also the perfect time to develop long-term financial habits.

If you want to know how to spend money wisely in your 20s, here are 3 wise ways to spend money that will help you succeed later in life, from two certified financial planners.

1. Start planning for retirement now

The average American retires in his or her early 60s, so it may seem strange to save cash for a stage of life that’s nearly 40 years away.

But time is on our side. Your 20s are “the most important age” to start saving for retirement, says Andrew Fincher, a financial advisor and certified financial planner at VLP Financial Advisors.

“It’s less about the amount you’re putting in [retirement savings] and more about how much time you’re invested,” experts says. “The compounding interest over a 40- or 50-year period is huge. If you do a smaller amount over 50 years, you’ll end up with a larger balance than if you didn’t start until you’re 35 and you max out.”

First, consider whether your company sponsors a tax-advantaged retirement account such as a 401(k). In this case, check to see if your employer also offers a ‘company match’ to match some or all of your contributions.

“There’s no other investment that I know of where you immediately get 100% on your money day one, or whatever the match is,” says Joe Conroy, certified financial planner and author of “Decades & Decisions: Financial Planning At Any Age.”

2. Focus on Paying Off His Debts

It may be tempting to spend money on a trip or dinner with friends, but to avoid getting worse later, you may want to avoid debt now. Don’t forget to work on it.

Credit card debt, car loans, student loans, and personal loans are the most prevalent types of debt among those in their twenties. People under 29 had an average credit card debt of around $3,000 in 2023, which has made debt repayment even more difficult due to high interest rates.

According to Ted Rossman, senior industry analyst at Bankrate.com, “more people are carrying more debt, and those balances cost more than ever” .

Rossman suggests two ways to deal with credit card debt: if you have multiple accounts on various cards, consolidating your debt or applying for a 0% balance transfer card.

Education Data According to his initiative, student loans are also a common burden for many young people, with almost 35% of adults between the ages of 18 and 29 carrying student loan debt.

Since many people live on an entry-level salary, repaying more than the minimum student loan amount can be a burden for people in their 20s, but Fincher He recommends that people focus on eliminating as much of that debt as possible.

“The problem is to look out further, when the interest on [student loans] has just accrued like crazy when you hit your 30s and really puts you in a more difficult position to be in,” he says. “To the extent that you have the ability to pay down a little bit more, focusing on that is a huge thing as well.”

3. Incorporate a wedding into your budget

If you’re in your mid-to-late 20s, it’s likely that your wedding invitations are You’ll receive more and more in your mailbox.

Attending a friend’s wedding will leave you with memories that will last a lifetime, but it can cost hundreds of dollars if you need a new dress, suit, or travel expenses. This number often increases even more when you’re part of a wedding party.

Preparing for the cost of attending a wedding can help you avoid debt from an expensive event, Conroy says. He recommends creating a wedding budget where you put in a set amount each month depending on the number of upcoming events.

“That way, you’re not just living off credit cards, you’ve actually set the money aside,” he says.

You can apply the same strategy to that big vacation or birthday dinner you’ve always wanted to go on. By creating a “me fund,” you can incorporate fun spending into your lifestyle without worrying about the consequences.