Top budgeting tips for your twenties

Growing up is a wonderful time. Through our teenage years, we crave independence and when we get into our twenties, we quickly get that in buckets. It’s not always easy to keep on top of and stay in control of our finances though. There are lessons to learn and mistakes to be made! Our young adult lives should be full of fun, freedom and working towards the lives we want to lead. However, there are lots of opportunities that can be taken in order to have a handle on our finances. Let’s have a look at some great ideas for budgeting tips for your twenties.

Stick to a budget

One of the most important budgeting tips for your twenties is actually making a budget. Not only that but sticking to it as well. It is all well and good to make a budget, but if you have no intention of sticking to it, it’s kind of pointless. Planning out your budget is integral as you need to figure out the income you have coming into your bank account, as well as the money going out for bills and other such spending.

When you write it all down and know exactly what is happening with your finances, you can figure out your budget. This can drill down into how much you have to spend on food, travel, and entertainment each month. That way you can work on sticking within those parameters you set yourself, which in turn will free up some cash to go into savings.

It is all too easy to gain independence and start spending money left, right and centre. When looking at how to manage money in your 20s, you need to be disciplined with our cash. That doesn’t mean not enjoying it. It simply means being aware of where we are spending and giving ourselves the opportunity for money to work for us.

Think about your future

These budgeting tips for your twenties can help set up your future as well. We’re not going to be in our twenties forever, nor our thirties or forties. The chapters of our lives move and progress and if you have kids, they fly by at a rate you can’t even imagine. Suddenly you are pushing forty but in your head, you’re still 21! The sooner we start thinking about our future, the better. We need to start thinking about savings accounts, pension pots and the power of compound interest.

Where are your savings? How much are you putting away with every paycheque and what is that money doing for your future? An easy access savings account is important, should we need to get our hands on money. You need to make sure that the account you have is making money though. Too many people have cash sitting in an account earning next to no interest. Be sure your cash is in the best possible place to maximise your money! What about other savings? Have you looked into stocks and shares? Also, consider the power of compound interest. This is when you earn interest on both the money you’ve saved and the interest you earn on said savings. The soon your start doing this, the more years it has to build and become more!

Pension pots are also something to consider as well. What will you live on when you are in your retirement? The sooner you start, the less you’ll need to put away every year. A general idea is to half your age and put that amount of your paycheque away each year, as a percentage. So if you started a pension at the age of 22, 11% of what you earn should g into your pension for the rest of your life. This gives it more years to grow into a decent pot for you. Obviously, if you only start at the age of 40 (20%), you have fewer years until retirement so will need to put more away. You can see why budgeting tips for your twenties are important.

Build your credit score

Do you know what your credit score is? If you are wanting to apply for a mortgage at some stage in the future, you need to get to know your credit score and do things to build and improve it. Your credit score is what potential lenders will see. Incorrect or inaccurate information will impact your credit score, meaning the amount of credit you are able to access is lower, or at a higher interest rate. A credit card is a great tool for doing this, as long as you pay it off in full when you use it. Keep a close eye on your credit score and you will ensure that you are on top of things and are getting the best possible deals from lenders.

Improve your relationship with money

Your twenties are the perfect time to improve your relationship with money and start putting in place some habits that will stay with you. Dividing your pay cheque so you have cash for everything you need, plus savings on top is a good starting point. You can go further than that though. What is your objective with the money you earn? What do you really want to use it for? Consider travel, charity, a wedding, and maybe children further down the line.

Having a handle on your finances allows for those things to happen with less of a financial impact. If you start putting some money away for that once-in-a-lifetime trip you want to enjoy the next year, you’ll have money in place for when you come to book. If you start to put cash into a wedding fund, when Mr or Mrs Right shows up, you have some cash there for the dream wedding you want. Rather than it burning a hole in your pocket so you spend it, a good relationship will allow you to enjoy what you have whilst being sensible and allowing money to be a well-rounded part of your life. This is all part and parcel of how to manage money in your 20s.

Pay off debt & build an emergency fund

We all make mistakes, but we learn from them. One of the best budgeting tips for your twenties is to clear your debt. You don’t want to be lugging this debt around with you for the next ten years. Get it cleared before it starts growing at an unimaginable interest rate and free yourself from those shackles. Debt really can drag us down and ruin the future plans we have do getting that sorted is key. Another area, which might be linked with that debt, is an emergency fund.

Do you have one? How much should be in there? What do you use it for? An emergency fund is there for those just-in-case moments. It should have between three and six months’ worth of money to help you survive. This should include bills, putting food on the table and paying your rent. If you were to lose your job, you have enough on your shoulders with that extra financial pressure. An emergency fund is there to relieve that anxiety, meaning you have one less thing on your plate and can concentrate and get back on track.

Final thoughts

Your young adult years can be spectacular. We truly become the people we’re going to be for the rest of our lives and discover so much about ourselves. However, you should also use that time to get a handle on your money. Using these budgeting tips for your twenties will set you up well.