There is no better time to set yourself up for a lifetime of financial success than in your 20s. While this decade may seem daunting as you tick off milestones such as college graduation, starting your first "real" job and possibly marriage, taking control of your finances is an integral part of growing up and becoming a successful and independent adult. To help you successfully navigate your finances, here are five money milestones everyone should strive to hit in her 20s.
1. Start saving for retirement. While retirement may seem a millennium away in your 20s, you'd be surprised how quickly time flies. Start saving money now to allow it to accrue and grow by your golden years. Think of it as letting your money age like a fine wine. As a general rule of thumb, aim to save at least 5 percent of your gross income, with the eventual goal of increasing it to 15 to 20 percent. If your employer offers a 401(k) match program, it's ideal to contribute enough to maximize the match. Think of it this way: That match amount is essentially free money to fund your future retirement.
2. Set a budget and live within your means. Simply put, make sure you have more money coming in than going out. Overspending is a big financial problem for many in their 20s, landing many in some serious debt down the road. Avoid overspending by establishing a monthly budget based on income and fixed expenses like rent and bills. Don't forget to include any lingering debt and, if possible, pocket some money away toward savings. Budgeting can be easy. Personal finance apps can put the power at your fingertips, giving you insight to where and how you are spending so you can make smart financial choices.
3. Create a debt reduction plan. Once you have established a budget, it's time to get your hands dirty and tackle debt. First, make a list of all your debt. Figure out how much you owe, the interest rate of each debt and the minimum payment due. Then review your budget to determine how much you can realistically afford to put toward paying down the debt. If you have more than one bill, start with the one with the highest interest rate while paying the minimums on the rest. Once the debt with the highest interest rate is paid off, move on to the second highest, and so on.
4. Establish an emergency fund. We know, we know, you have already taken care of your bills and paid down some debt, and now we're telling you to stash away even more money? Well, yes, but for good reason! Setting up an emergency fund will protect you when life hits you with unexpected and, at times, costly expenses. Whether you lose your job, get hit with a big medical bill or your furry friend has to go to the vet, this fund will act as a safety net. Start by saving $1,000. Then work toward putting away three to six months of your net pay. If this still feels too overwhelming, start small and put that spare change to good use.
5. Set a long-term goal. Do you dream of buying a home, traveling the world or sending your unborn children to college? No matter how big or how small your long-term goals are, planning for these life events now will make these goals attainable sooner rather than later. Savings accounts are a great way to achieve these goals, so it is best to set aside that money before you ever see it (either through an automated savings plan or a paycheck deduction).
Don't put off tomorrow what you can do today. Accomplishing these milestones in your 20s will help to set a strong financial foundation while you are still young and set the stage for a successful financial future.
Holly Perez is a consumer money expert at Intuit and mint.com spokeswoman, a leading Web and mobile money management tool that helps people understand and do more with their money.
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