by Zoe Zorka

Your twenties are a significant time for your finances and future. And contrary to popular belief, you don’t have to spend your twenties broke.

But at the same time, you shouldn’t blow through your twenties with extravagant spending. Use the decade to build good habits, learn to budget, grow wealth, and set yourself up for future financial success.

Here are five ways you can capitalize on your twenties when it comes to finances:

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1. Build Good Habits

Unless you’ve struck gold, your twenties probably won’t be a time of building great wealth. But you can start. And you can build habits that will lead to amassing wealth later in your thirties and forties. 

Becoming disciplined is one of the most incredible things you can do for your financial future. It’s hard if you coasted through your teens with little responsibility. But it’s well worth it. Here are some habits worth building in your twenties:

• Start setting goals

• Create plans to reach your goals

• Get organized by planning and using your time effectively

• Cut out harmful and toxic things in your life

Start building habits, setting goals, and doing things even when they’re hard. Your future self – and your future family – will thank you for it.

2. Maximize Your Earnings

Make as much money as possible. This might sound greedy and arrogant, but it’s not – it’s smart. This doesn’t mean to sell your soul for cash. It means that within your current means and considering your current opportunities, prioritizing making money.

The more money you make now, the more you can start saving and investing (more on this later). And thanks to things like compounding interest, money invested now is worth way more than money invested later (barring any economic depressions). 

One caveat: consider the long term. If taking a lower paycheck now means setting yourself up to make more later, that’s okay. There are many factors at play. If the opportunity to make more right now is there, take it.

3. Learn to Budget

Budgeting might be the most important habit to build in your twenties. If you’re maximizing your earnings, it won’t be very painful. If things are tight, it will be hard – but again, well worth it.

Use budget software like Mint or YNAB to get started. Include all of your income, and don’t leave out a single expense. Think through everything – even the few dollars you drop at coffee shops or on candy. It needs to be in there. 

And once you’ve created your budget, stick to it! Keep track of your expenses through each month and when you’ve capped out in an area, stop spending. It’s relatively simple, yet so many people blow through their budgets. 

But you build good habits and grow in the discipline now; it will get easier.

4. Eliminate Unnecessary Expenses

Once you have your budget all laid out, start picking through it with a fine-toothed comb to identify areas you can spend less. This is not fun, but if you can cut out unnecessary spending now, it means you can save, invest, and have more leeway later. 

It’s not wrong to spend money or to want nice things. And it’s okay to live life now rather than defer fun living to your later year. Just be smart. Consider your needs.

Do you need four different streaming services? Do you need to eat exotic meals multiple times a week? Can you spend less on groceries by shopping smarter?

5. Start Saving

Once you’ve maximized spending and started budgeting, it’s time to start saving. Many financial gurus recommend having an emergency fund of a few thousand dollars in case you lose your job, have large unexpected expenses, or go through a rough patch. 

This is a good idea in your twenties. You don’t want to find yourself taking out a loan or getting deep in credit card debt. Avoid this at all costs by saving now for unforeseen circumstances.

You can also start saving for future goals. Want to buy a new car before you turn thirty? Thinking about a house? Check out pigly.com for calculators to help you determine how much to save for your goals – and a lot more.

6. Consider Investing

Many conservative finance experts encourage you to wait until you’ve got all debt paid off and some money saved up before investing. It’s entirely up to you and the level of risk you’re willing to take. If you’ve got severe debt with high-interest rates, this is probably a good idea. But if you only have some debt and reasonable interest rates, it’s okay to consider investing.

Start with long term investments, like saving for retirement through a 401(k). Your company may offer to match your deposits with each paycheck. If so, take advantage of this.

Another more short term option is to start investing in stocks and bonds. You can choose individual stocks you’re interested in or invest in indexes and mutual funds, a more conservative route.

As mentioned above, investing in your twenties can mean big payouts in your future, thanks to how your investments will compound over time. Even if you don’t have a huge salary, you can outearn those who make more in the long run by starting this journey early. 

7. Educate Yourself

The most significant investment you can make in your twenties doesn’t involve stock, mutual funds, or savings accounts. The most significant investment you can make is one in yourself. 

Learning how money works will change the way you view it, earn it, and spend it. Educating yourself will set you up for success. Knowledge is the most powerful currency in finance.

Learn the basics of assets, liabilities, cash flow, taxes, and investing. You don’t have to become an expert. Even the basics will pay off.

Set Yourself Up for Success Later

Doing these things now will help you build wealth in the future. Become disciplined, start budgeting, cut unneeded expenses, begin saving, consider investing, and, most importantly – educate yourself.