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Today I have an outstanding post from Dominique over at Money Goody. Enjoy!

Your twenties are an important time for a lot of reasons. It’s usually when you’re finishing college and stepping into adulthood. It’s also when you start to build the foundation for your relationship with money.

When you hear stories of people who’ve ruined their credit or are drowning in debt, you’ll usually find that it started in their twenties. On the flip side, the people that end up doing well later on in life had a good foundation to start off on, and it carried on with them for decades.

So how do you avoid ruining your finances early on in life? Follow these 20 tips to get your finances in order in your twenties!

1. Don’t spend more than you make

This is a big one. Your twenties are seen as a time where you can have fun and not stress so much over the long term consequences of your actions. So you’ll probably end up going out to restaurants, bars, events and buy random things you don’t need.

In order to maintain that lifestyle, you’ll quickly find yourself living paycheck to paycheck and relying on credit cards to survive. This is a horrible habit to start because it’s difficult to get out of.

Instead, develop the habit of spending less than you make. Whether that means developing a budget or adjusting your lifestyle, you need to make sure you’re not in the red each month.

2. Open a retirement account

Whether you choose a Roth IRA or a 401(k), start planning ahead for your retirement asap. Way too many twenty-somethings put off retirement until their thirties or even later. That means you miss out on tens or even hundreds of thousands of dollars you could’ve had if you started earlier.

One of the biggest excuses for not opening a retirement account early on is because you don’t make a lot of money. If you can’t afford to put aside 10% of your income into a retirement account, that’s fine. But you should be able to save something, even if it’s just $50. If you work for a company that offers a 401(k) match, even better!

3. Invest in real estate

Investing in real estate in your twenties? That’s crazy talk! Not really. If you’re in a position where you can afford to buy property, it’s one of the best investments you can make early on. Whether you plan on renting the property out or living in it yourself, your twenties are a great time to make the move.

Most people end up getting a 30-year mortgage. That means if you start in your twenties, by the time you’re in your fifties you’ll have a home that’s completely paid off. There’s also the possibility that the housing market could go up considerably over the years which will allow you to sell it for a nice profit if you want.

The point is, don’t think that real estate is out of reach. Plenty of people in their twenties are starting to get into house flipping or buying their own homes instead of renting.

4. Invest in stock

The stock market can be a little intimidating for people new to investing. However, with all the information available on sites like Money Mini Blog, you have plenty of resources to get started.

If you’re looking for an extremely quick way to get introduced to stocks, try an app like Robin Hood or Acorns. These apps have extremely simplified and streamlined investing for young adults. All you have to do is download an app, setup your account and connect a funding account.

One of the best tips for new investors is to invest in dividend paying stocks. Dividends are portions of a company’s earnings that get distributed among the owners and investors (you) each quarter. Not every stock pays dividends, so you’ll have to search for ones that do.

It’s a wise move to reinvest your dividends directly back into getting more shares. By continuously reinvesting, you’re increasing your stake in the company and as the stock price increases so will your return.

5. Don’t get multiple credit cards

If you’ve been able to make it into your twenties without co-signing for anyone or doing anything else to negatively impact your credit, you’re going to end up getting a lot of credit card offers. If you’re a recent college graduate, you can expect your mailbox to get flooded with letters from banks and credit card companies.

The temptation is extreme, especially when companies are offering 0% APR for the first 12 months or cashback on your purchases. If you’re not careful, credit cards can land you in a deep hole of debt that’s hard to climb out of.

Choose one credit card that offers nice benefits like a low interest rate and rewards, and stick to that. If you’re using your credit card responsibly, one is all you should need in your twenties.

If you’ve maxed out your card, the solution is not to get a second one. Buckle down and focus on paying off the debt instead of digging yourself into an even deeper hole.

6. Get rid of unnecessary bills

With monthly meal services, Netflix, music streaming and other recurring charges, it’s easy to wind up paying a lot more each month than you need to.

Individually, these services are reasonably priced. So $10 for music, $9 for Netflix, $20 for a gym membership and $20 for a snack subscription box doesn’t seem too bad. But once you start adding it all up, you could easily be spending well over $100 each month on services that you probably don’t need.

To workaround this, consider splitting the costs of recurring services between friends. Some services like Google’s music streaming provide family plans that allow you to add multiple people to one account for a few bucks more than an individual account. And none of us are strangers to sharing Netflix accounts. But instead of sticking one person with the bill, have everyone chip in.

7. Learn to cook

Without a doubt, dining out is one of the most common expenses people in their twenties incur, and it can be drastically reduced. All you have to do is learn to cook.

You may feel like you “have” to order out because you don’t have time to cook. But the reality is most of us choose not to make our own food because restaurants are more convenient and the food tastes better.

But you can change it up by experimenting with different recipes online and prepping your meals in advance to save time. With some smart shopping, you can easily cut your food expenses in half every month if you currently order out more than half your meals.

8. Get a side hustle

The days of relying on a single job as your only source of income are long gone. Thanks to the rise in entrepreneurship and the internet, more people are realizing their income isn’t restricted to what they earn from a 9-5.

There are plenty of great ways to make money online, or you can even do some offline gigs like garage sailing or handyman work.

The extra income will allow you to have money to set aside for savings and retirement. Your twenties are a great time to start a side hustle because you’ve got energy and room to recover if things don’t work out. Diversify your income as much as possible.

9. Don’t go back to school because you’re “lost”

When you’re in your twenties and feel lost with no sense of direction in life, it’s common for people to go back to school and get another degree. Wanting to further your education is great, but if you’re doing it for the wrong reasons it’s a waste of money.

Instead of trying to solve the problem by throwing more money at it, sit back and think about what you really want to do with your life. There’s a good chance that more school isn’t the answer. And if it is, look for cheaper alternatives that can help get you on the right path.

10. Start an emergency fund

If you were to lose your job today, would you have enough money to survive for the next few months? If you’re like a lot of people in their 20’s, you probably wouldn’t last very long before needing to move back home with the parents.

Cover yourself financially by starting an emergency fund that’s large enough to cover all your living expenses for at least three months. You might think everything is going well at the moment, but life is unpredictable. Your employer could go under or you could find yourself out of work for any number of reasons. You need to be prepared.

11. Build your credit history

There’s no reason for you not to be able to have a credit score above 700 in your twenties. As long as you’re using credit responsibly, and paying off your debts and bills on time, you should be able to build up your credit fairly easily.

A good tip to build your credit is to only take on debt you know you can repay. For instance, if you feel like you’re going to have to stretch your wallet to be able to make car payments, don’t buy a new car. Or just buy a cheaper one.

By doing this, you’ll be able to establish a good repayment history which can help improve your credit.

12. Get health insurance

When you’re in your twenties and feel healthy and unbreakable, the thought of spending hundreds of dollars on health, dental and vision insurance can seem like a waste of money. Why pay for something you’re not going to use?

Not having health insurance is a big mistake, and despite it being a requirement in the U.S now, some adults still try to avoid it. In addition to the fees you may end up paying if you’re not insured, when the day comes that you actually need to go to the doctor or hospital, you’re going to seriously regret not paying for health insurance.

At the same time, don’t over-insure yourself. Most employers offer different health insurance plans designed for different needs. Unless you have existing medical issues, most healthy young adults don’t need to pay for the most expensive and robust health care plan available. Research the different options and pick one that best fits your needs.

13. Look for small wins

Do you go to Starbucks every morning? Smoke cigarettes? Or maybe you go grocery shopping at Whole Foods instead of a cheaper option because it’s closer. If you can make adjustments to your lifestyle choices, you can save a ton of money each month.

Here’s a neat tool that shows you how much you can save by breaking free of your Starbucks and gourmet coffee addiction.

By quitting your smoking habit, you’ll be able to save thousands of dollars every year and save your health.

As for grocery shopping, Whole Foods is a great option for people looking for organic options. But keep in mind that many lower-cost grocery chains also offer organic products as well, so you could be spending more money than you need to by limiting yourself to Whole Foods and other high-end grocery stores.

14. Track where your money goes

Our parents and grandparents lived during a time when you paid for things with checks. They would balance their checkbooks every month and know exactly where money was going. Today, we tend to swipe our debit or credit cards to pay for everything so the art of tracking spending went right out the window.

As nice as it is to be able to use cards to make purchases, it makes it far too easy to spend money mindlessly. When you’re tracking your expenses each month, you’re able to see your spending habits and find the areas that you can potentially save money on.

Luckily you don’t have to do it manually. Use a tool like Mint that connects to your bank account and categorizes your transactions each month. You might be shocked to find out how much money you spend at Subway every month!

15. Get a financial mentor

Mentorship is very underrated, but it can help you out with your finances tremendously. A financial mentor is someone that has had success with money and is open to giving you advice and guidance.

The benefit of a mentor is they have no personal stake in your decisions because you’re not paying them. Therefore you don’t have to worry about a conflict of interest or whether or not they’re giving you advice based on their own self interest.

That’s not to say that you shouldn’t pay for a financial advisor. Financial advisors are great because they take a more hands-on approach with your money. But in your twenties, you may not be able to afford one. So finding a good mentor is a great alternative to have someone to talk to about your money.

16. Don’t let your student loans get out of hand

You successfully graduated college and you feel great about the accomplishment. But then you get your first statement from your student loan provider and your excitement turns into fear and anxiety while you struggle to figure out how you’re going to pay back all that money.

First and foremost, realize that there are a lot of options to help you wrangle down your student loans. Whether it’s refinancing or consolidating, if your payments are too high you can try to make them more affordable.

The two things you should avoid doing are:

  1. Avoiding repayment completely
  2. Continuously deferring the payments

Ignoring the loans won’t make them go away. In fact, it’ll just make it worse and hurt your credit. Deferment might sound like a good plan, but it’s like throwing all your junk into a closet. Eventually you’re going to have to deal with the problem.

Despite the negative reputation student loan providers have, most of them will work with you if you give them a call and explain your situation.

17. Stop relying on your parents

If you’ve been reliant on your parents to borrow money or handle your money for you, it’s time to stop. When you’re letting other people handle your finances for you it means you have no idea what’s going on with your money which is an awful habit.

Your twenties are a time when you should become self-sufficient and not need anyone to hold your hand. Transitioning away from having your parents help cover your expenses or reaching out to them when you need money for bills is going to be difficult, but it’s necessary.

Not having anyone to lean on will force to you become more responsible with how you spend and manage your money.

18. Learn about money

Unfortunately unless you’re a finance, accounting or business major, you probably didn’t learn much about money in school. The bright side is there are a ton of resources to fill in the gap. Whether it’s through blogs like this or books, take some time to educate yourself.

Learning about taxes, investing, compound interest and other financial topics doesn’t sound like the funnest way to spend your time, but it’s well worth it. Here are some good books to start out with:

19. Check your credit report

Let’s say you’ve followed all the tips on this list and are a financially responsible twenty-something. You pay all your bills on time, you’re saving money each month and even have some sweet investments. That’s great. But for the past six months someone has been using your identity to open up credit accounts and loans in your name. As a result, your credit is ruined without you ever knowing.

Identify theft is a huge problem right now, but unfortunately most people don’t realize it until they try to get an auto-loan or buy a house and get denied. This is why it’s so important to regularly check your credit report. Even though you know what you’ve been doing financially, you need to always be on the lookout for suspicious behavior on your credit report.

There are plenty of services like Credit Sesame that allow you to check your credit score, and even offer identity theft protection. This can be a lifesaver for young adults because dealing with identity theft is a huge pain. Trying to repair your credit after having your identity stolen is even worse.

20. Make a budget

I don’t think I have to go super in depth here. But if you want to be able to set money aside, you need a plan. Take a look at all your expenses and income streams, and make a budget or plan on how you’re going to be able to put money aside each month.

Here are some great resources to help you out.

Take all these tips into consideration and you’ll be well on your way towards taking control of your finances in your twenties and beyond.

About the Author:
Dominique is a personal finance blogger that helps young adults and twenty-somethings get a better understanding of budgeting, investing and money. You can get more tips from his site, Money Goody.