A Beginner's Guide to The Financial Decisions To Make in Your 20s


In your 20s retirement feels like a thousand years away. Ironically, if you don't start planning for retirement and your financial health in your 20s that feeling can become reality. Making smart financial decisions early on gives you a strong basis on which to build your future. Follow these recommendations and you'll be well on your way to financial stability.

Build Your Credit

At college campuses across the country, you see credit card kiosks. These credit cards are often offered even if students have no credit and worryingly, no income. Don't fall for this credit trap. Start off your credit journey on the right foot. Start with a secured credit card from your financial institution. By making a deposit that matches your credit limit you'll be able to pay for items with the card and as you make regular, on-time payments your credit limit will increase beyond your initial deposit and your payment history will be reported to credit reporting agencies. 

From there, move on to a regular, unsecured credit card with a limit based on your income. Keep your credit utilization below 30% of your credit limit and with regular payments, you'll be on the road to good credit. 

Negotiate Your Salary

Throughout your life, your raises will often be a percentage increase based on your current pay. When you don't negotiate your initial salary with a new company, you lose money even as you make more money. Do your research going into your negotiations. If the salary range is $55,000 to $65,000 you should be asking for a few thousand more than the high end of the range. Even if the company initially offers quite a bit less than the range, start your negotiations high with the understanding that you'll meet somewhere in the middle. 

An article by Linda Babcock noted that women don't like to negotiate, resulting in serious income losses. Women who do regularly negotiate have a lifetime earning of at least $1 million more than their counterparts who don't negotiate. Consider that you will generally make 7% more each time you negotiate your salary and extrapolate that over every job you'll have during your life; it's a lot of money.


Examine Your Partner's Habits

While no one is arguing that you should marry for money, it's important that you look at your partner's spending and saving habits. Find out if he has good credit, how much credit card debt he has and what kind of spending habits he has. Ask her what her financial goals are, whether she has regularly filed and paid her income taxes and how much money she makes. 

If you discover that your partner doesn't have good financial hygiene, it's not a deal-breaker but it should be something that you work through together before planning the rest of your life. Arguing about finances is one of the top reasons couples break up. Knowing if you are financially compatible and willing to put in the work to keep your finances healthy means you've already removed one of the riskiest components of a romantic relationship.

Live Somewhere Less Expensive

While some jobs require you to live in expensive cities like New York or San Francisco, if you have a job that can be done anywhere, choose to do it somewhere that is affordable. The cost of housing, whether you rent or buy, is a huge chunk of your budget. Just because you live somewhere affordable doesn't mean you have to give up opportunities if you do your homework. For example, the median cost of a home in Chicago is $229,000 compared to $680,000 in New York. If you want to live in Manhattan itself the cost of a home is approaching $1.5 million. While you will also make more if you live in New York, the increase in salary isn't commensurate with the cost of housing.


Keep your goals in sight and a level head to make sure your finances in your 20s are the basis of a long, stable life.