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16 Ways to Save Money in Your 20s

To save money in your 20s may seem like a pipe dream. After all, don’t you have to make it to save it? With a stubborn job market, is it really even worth your while?

The short answer: yes. However, it requires a mindset that you will need to start trying to master now. Hopefully, the following ways to save money can help.

How to Save Money in Your 20s Tip 1. Create an emergency fund.

One of the biggest ways that young people get into financial dilemmas is through the short-sighted thinking that something bad can never happen to them.

Not only “can” it happen, it will happen. Unforeseen financial obstacles sneak up on you through a variety of ways.

You fail to see the red light up ahead and end up parking your car in someone else’s back seat.

Your computer craps out on you.

Your health insurance rates keep going up about 6,000% every November (okay, you may not be experiencing this one until you’re 26, but believe us, it’s coming).

Failure to plan for the unforeseen with an emergency expense fund is why you end up having to put a lot of that on a credit card with exorbitant interest rates, thus beginning the death spiral of debt soon to take over your life.

Unfortunately, it’s getting harder and harder to plan for these types of challenges because there seems to be more of them, but you need to be doing what you can by holding out 5, 10, or 15% from the take-home part of every paycheck.

Do it while you still can, and you may have less of it to do later.

2. Get your money working for you.

Money that stays stagnant becomes worth less over time. Think of it this way. You’ve got $100 in an account paying 0.01% interest. Inflation, however, is rising at a rate of 3% per year.

That means each year your $100 can buy 3% less than it did the year before. While you may not notice the effects as much in the short term, fast forward 10-15 years and extrapolate that over every dollar you make, every penny you save, and it just gets depressing.

That’s why you need to develop a healthy distrust of banks early on. Go instead toward more measured, risk-oriented investments.

If you are not sure about it — and who can blame you, you could end up losing it all in a short amount of time with the wrong investment — contact a financial planner who can help you find stocks and mutual funds with a proven track record of growth over time.

A family member does this for a living and nets around 13% per year on his clients’ accounts. Thirteen percent is an excellent return on investment, and it’s how most people get rich incrementally over time.

3. Stop trying to ‘keep up with the Joneses.’

Popular culture has taught us we have to have the hottest phone on the market right now. The iPhone X can’t wait for a price drop. It must be ours the moment it becomes available!

This mindset will more often than not lead to spending too much and gaining too little. Stop caring about what your friends have or what they are doing with their money.

Make good decisions that will place you in a position to afford things a little later down the road instead of living with Mom and Dad well past the age of entering adulthood.

4. Consider starting a retirement account.

Retirement accounts are quite different from emergency funds. EFs must be accessible because you have to be able to draw from them on a moment’s notice. That’s why the word “emergency” is in there.

With retirement accounts, you keep your money locked away and out of reach, with the threat of a costly financial penalty should you ever decide you just have to have it in order to address some want or need.

You’ll think much harder about withdrawing from a 401K or IRA than you will a regular old money market savings account when the threat of losing up to 30% of it to Uncle Sam looms over the proceedings.

5. Create different ‘buckets’ of cash.

You might have heard this put as the “envelope method.” You keep separate envelopes of cash laying around with labels marked on them like “Electric Bill” or “Cable” or “Car Payment.”

Then, you refuse to use those monies for anything else but those purposes.

On the credits side, you can create different buckets of cash by drawing from more than one income source: you work two part-time jobs or a full-time and a part-time; you get a tax refund each year; you sell stuff; you invest in stocks that pay dividends.

You get the point.

By diversifying your income streams and earmarking funds to address certain expenses and nothing else, you can ensure that you are always paying bills on time and reaching your full earning potential.

6. Limit your loan amounts to the bare essentials as a student.

Student loans is a popular topic of conversation these days. The loans themselves, not so much.

That’s because students have convinced themselves they have to borrow a crapload of money to get through school, so they might as well just borrow as much as humanly possible.

There are serious flaws in this approach to life.

For starters, student loans have some of the best interest rates you’ll find. They’re downright excellent when it comes to the typical Visa or Master Card.

Secondly, you don’t have to take all the money that is available to you, nor should you.

By strategically planning your college education ahead of time, you can keep costs as low as possible while placing yourself in a better position for greater non-loan financial assistance. (By non-loan, we mean “free money”; the stuff you don’t have to repay.)

So, Mr. Genius Blogger-Man, how do you suggest I keep the cost of college low? Glad you asked. We’ll go into more detail in the next few entries, but here’s the primer.

A. Go to a community college for your first two years to get general education requirements knocked out.

B. Use that time to really search your soul, talents, and interest for the kind of field you want to work in.

C. Finish pursuing that particular degree path at an in-state public university.

D. Apply for as many grants and scholarships as you can from your senior year of high school and forward. Excel in the classroom and/or an extracurricular activity.

E. If going to grad school, apply, apply, apply! Take whichever school offers you the best financial deal — (i.e. grants, scholarships, work study) — unless it makes sense to do otherwise.

No one said college is cheap, but by following this pathway, you’ll get through it with a lot less financial damage.

7. Attend community college in a ‘free tuition’ state.

Who knows how long this method will be on the table, but there are states around the country that are, at this very moment, testing a free tuition model, and they are called community colleges.

In item No. 6, we recommended that you go to community colleges anyway because they’re cheaper, and they’ll help you get your general education requirements out of the way while you’re figuring things out.

But if you can take advantage of a free tuition community college, even better!

Of course, you’ll have to do the math to make sure that it makes financial sense.

Hold on, you may be thinking. Isn’t free free? Of course this would make financial sense! Well, not necessarily. That would depend on the situation because many free tuition community colleges require students to be in-state residents, which can take a year or so to pull off.

You’re not going to be able to live in such a place for one year without spending any money for room and board, so check first to see what you would be giving up in order to become eligible.

You could still come out on the winning end if you have a relative who’s okay with you living with them for a year until you can meet the requirement.

It also may be that you’re currently living with your parents in a free tuition state with a community college within driving distance. If so, use this to your advantage.

8. Finish undergraduate work at an in-state public university.

The worst lie that students can tell themselves — and one that has perhaps been foisted upon them by well-meaning but ignorant adults — is that it matters where you get your undergraduate degree.

It doesn’t, so long as you finish it and do well enough in doing so that you can gain acceptance to a reputable graduate program in your field.

Most careers today require at least a Master’s Degree if you want to get ahead. So stop thinking you’ll reach the top of your field in an academic field by stopping at the Bachelor’s.

You can still make a good living in some fields with that or with a skill-driven career from a trade school or technical college. But no one is going to hire you to be principal or superintendent with a Bachelor’s Degree.

With that said, why stress yourself out — and max yourself out financially — going to a four-year university that costs $50,000 a year?

You shouldn’t.

So grab the low-hanging fruit and do your best while you have it. You will get to the same place at a fraction of the cost.

9. Follow the money when getting your Master’s Degree.

Where you do your graduate work (i.e. Master’s, Ph.D) is more important, though you can still do much better than you’re probably thinking without getting into an Ivy League school.

By all means, apply to where you want to go. But don’t stop yourself with one school, and don’t take the first school that accepts you if it is not offering better opportunities.

10. Get a part-time job during school.

Many students overlook how helpful and how doable working while going to school full time really is. Yours truly worked more than 30 hours per week while taking anywhere from 15-21 credit hours per semester.

(Admittedly, 15 is the best route to go in this scenario.)

As a result of the hard work, I had money to do things, and I had motivation to make the most of my free time.

Part-time jobs while in school allow you to make extra money and get used to the demands of the real world while learning about the benefits of structure to your productivity.

11. Build a budget ASAP, and then stick with it.

Budgets are uber important for saving money at any age, but when you’re in your 20s, it’s so much easier because you (likely) don’t have the wife, kids, mortgage, and all other worries to deal with.

Figure out how much you owe, how much you’re spending, how much you want to save, and what you’re earning. Make sure the earning part is higher than the other, and boom, you’ve got a budget that works.

12. Use more than one bank.

This principle has already been covered in previous entries on this list, but it deserves its own point because it’s a slightly different approach from the envelope/bucket method, and it can make a huge difference.

By using more than one bank for each account, it becomes a little more difficult to move money around any time you so desire. That extra barrier between revenue sources will teach you to think about money in a more rigid and precise manner — a manner that lends itself to saving.

13. Cash diets — early and often!

One approach I love but don’t get to try often enough — partly because I didn’t heed my own advice at your age — is the cash diet.

You simply take a month to say, “I won’t buy anything that I don’t have the cash to pay for at the point of sale.”

If you’re always running by the ATM to withdraw money, it doesn’t really count. Stick to your budget, give yourself a cash allowance, and don’t deviate from it.

Give it about a month to become habit, and you’ll be surprised by how much money you save over time by not making as many superfluous purchases.

14. Eat at home.

There is no comparison between the cost (and health benefits) of eating at home compared to eating in a restaurant.

A plate of spaghetti at home — when added up over what you can get out of a single box of noodles and spaghetti sauce — may run a few bucks, and it could feed an entire family. Buy the same meal at Olive Garden, and you’re looking at $10-$15 for a single person.

Additionally, you get to measure portions at home, so you have more control over consumption than you do at a sit-down location.

15. Consider debt refinancing.

There will come a point in your life — usually in your 20s — that you start to accumulate stuff, be it a house or a car or credit card debt or those aforementioned student loans.

When you have all those expensive plates spinning in the air, it’s only a matter of time before one or two or all of them come crashing down on your finances, making you feel like a broke, overwhelmed loser.

That’s when refinancing can be a welcome option. By bringing all those debts under one umbrella, you can simplify your life, lower your overall payments, and get out of debt quicker.

By getting out of debt (and staying out of it), you put yourself in a better position to save, save, save.

One thing, though: don’t just consolidate everything into one payment if it doesn’t make sense to do so. You may have a really sweet interest rate on a car or house that actually comes up in collective interest when it’s comingled with other high-interest debt.

Do the math. Figure out what it will do to the payment, and if you can make it work as a separate payment at the lower interest rate before moving forward. It could be keeping two or three extremely low interest rate debts separate makes more sense financially.

And the final way to save money in your 20s: Buy on sale.

If it isn’t yellow or red-tagged, don’t buy it. Also, don’t buy seasonal clothing during the season in which it’s popular. And if you have to have those Christmas decorations, wait until Dec. 26 instead of buying them on Black Friday.

You may have to run barebones on the colorful packages for a year, but you’ll be loaded when the next holiday season rolls around.

In closing

To save money, you have to learn how to better manage money. That means diversifying income streams. It means being disciplined in your spending. It means not taking on any more debt than you have to, and working hard to repay it off as soon as possible. By balancing the two sides — revenue vs. expenses — you won’t get sucked into the vortex of debt that keeps you from saving. And in the end, you’ll truly be independent. What are some ways you like to save money? Share your recommendations in the comments section below.

Student Loan Hero also has a good primer you should check out when trying to decide whether to save money or pay off your student loan.

[Featured Image by Flickr Creative Commons]

Written by

's work appears regularly here at 4tests.com and across the web for sites, such as The Inquisitr and Life'd. A former high school teacher, his passion for education has only intensified since leaving the classroom. At 4tests, he hopes to continue passing along words of encouragement and study tips to ensure you leave school ready to face an ever-changing world.

Website: http://aricmitchell.blogspot.com/

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