Your 20s are an exciting decade filled with major life changes: graduating college, getting your first job, buying your first car, or perhaps your first home. Here at Schenley Capital, we recommend that you establish healthy financial habits that can have a long-lasting impact on your future.
The good news is that small and consistent action now can create a strong financial foundation for years to come.
Establish Your Financial Accounts
One of the first steps toward financial independence is setting up the right accounts. At a minimum, you should have a checking account for everyday expenses, a savings account for short-term goals and emergencies, and a retirement or investment account to begin investing for your future.
If your employer offers a retirement plan, such as a 401(k) plan, consider participating in it as early as possible, especially if there is an employer match. An individual investment account can also provide additional flexibility for long-term wealth building.
Develop a Budget and Track Spending
A budget is about understanding where your money is going and ensuring it aligns with your priorities. Tracking your spending can provide insight into your financial habits and provide you with the confidence needed to make healthy financial decisions. Whether you use an app (like Rocket Money or Credit Karma), spreadsheet, or notebook, having a budgeting system is very important.
Build Your Credit
Establishing credit early can help for future financial opportunities such as renting an apartment, purchasing a vehicle, or getting a mortgage. To do this, open a credit card in your name and use it responsibly by making payments on time and avoid carrying large balances. Good credit is built over time, and starting in your 20s is an ideal opportunity.
Automate Your Savings
Setting up automatic transfers from your paycheck to savings and investment accounts can help ensure that saving becomes a habit. Regardless of your contributions, your savings will add up significantly over time (thanks to the power of consistency and compound growth).
Learn the Difference Between Wants and Needs
One of the most valuable financial skills is understanding the difference between things that are necessary and things that are not. Making intentional decisions about how you spend your money today will greatly impact your ability to make decisions for tomorrow’s goals.
Avoid Lifestyle Inflation
As your salary increases, it is important to refrain from increasing your spending along with it. Consistently increasing your spending can make it difficult to build long-term wealth.
Create an Emergency Fund
Building an emergency fund can help provide financial security and reduce the need to rely on debt when unexpected expenses occur. A common goal is to accumulate three to six months’ worth of essential living expenses, though starting with a smaller target (especially in your 20s) is perfectly acceptable.
The Bottom Line
Your 20s are less about perfection and more about establishing healthy financial habits. Building credit, budgeting, consistent savings, early investments, and smart decisions can put you in a very strong position for the future. The choices you make today do not need to be dramatic, just intentional. Small steps now will enable your financial foundation to support you for decades to come.