How To Live Richer in Your 20s

·3 min read
Alessandro Biascioli / Getty Images/iStockphoto
Alessandro Biascioli / Getty Images/iStockphoto

Day 25: GOBankingRates wants to help you Live Richer. Throughout the month of July, we’ll be sharing daily tips for how you can do just that, with advice on budgeting, saving, investing, making the most of your career and managing debt — plus money advice for every phase of your life. Check back each day during our 31 Days of Living Richer to learn everything you need to know to set yourself up for financial success and live the richest life possible.

Check Out Day 24: How Debt Prevents You From Living Your Richest Life
Read Day 23: How To Pay Off Your Debt in a Manageable Way

Your 20s are typically the beginning of your life as a financially independent person. You are either in college or recently graduated, and this is the decade where you get your first real job and start working your way up the career ladder.

When you think of “living richer” in your 20s, you probably think of driving a fancy car, going on shopping sprees or taking lavish vacations. But the best way to actually live richer during this phase of your life is to lay the groundwork for your future years so that you’re well prepared when it’s time to buy a house, start a family and — many years down the line — retire.

Go Back To Day 22 of Living Richer: How To Stop Accumulating Debt Once and for All

Here’s how experts say to live richer in your 20s.

Build Good Financial Habits

“Building smart financial habits is essential, and can make a big impact over the course of your financial life,” said Marcy Keckler, vice president of financial advice strategy at Ameriprise Financial. “This includes being committed to making timely payments on any debts like student loans, so you can build a strong credit score. It’s also important to learn to live within your means — avoid taking on credit card debt to cover discretionary, lifestyle expenses.”

Discover Day 21: Top 3 Expert Tips for Managing Debt

Build Up an Emergency Fund

Saving up in an emergency fund should be a top financial priority for people in their 20s.

And Day 20: 3 Signs You’ve Found Your Dream Job

“This is the money you set aside for when life throws you an unexpected curveball and the dishwasher unexpectedly needs to be replaced or the car needs major repairs,” said Faisa Stafford, president and CEO of Life Happens, a nonprofit educating consumers about the importance of life insurance. “Don’t feel bad if you don’t have that much saved, or any at all — starting when you’re young is the best way to build this safety net.”

Day 19 of Living Richer: Top 3 Expert Tips for Salary Negotiations

“While the rule of thumb is three to six months of expenses, every dollar you put away helps,” she continued. “I’d even recommend putting that money in a separate account and keep building it up in case you need it during a life transition, such as switching jobs, changing apartments, graduating or moving to a new city.”

Save For Retirement

Retirement may be decades away, but it’s definitely not too soon to start saving for it.

Read Day 18: How To Achieve Better Work-Life Balance

“Make sure you are contributing to an employer-sponsored 401(k) plan if one is offered,” said Brian Walsh, Jr., senior financial advisor at Walsh & Nicholson Financial Group. “Save now because you will need it in a few years!”

Start Investing

You may also consider opening an investment account in addition to your retirement account.

And Day 17 of Living Richer: Top Perks To Look for When Searching for a New Job

“The earlier someone can start investing the better,” Keckler said. “[People in their 20s] have time on their side, and the power of compounding is a huge advantage that comes with that. Compounding is the ability of an investment to generate earnings that in turn generate their own earnings, and can result in a lot more than the amount you’re actually investing.”

Robert R. Johnson, Ph.D., CFA, professor of finance at the Heider College of Business, Creighton University, recommends index funds for those who are new to investing.

Discover Day 16: How To Find a New Job That Fits Your Life

“People in their 20s should begin investing in a low-fee, diversified equity index fund and continue to invest consistently, whether the market is up, down or sideways,” he said.

Day 26: Join us tomorrow for our Living Richer series when we discuss how to live richer in your 30s.

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This article originally appeared on GOBankingRates.com: How To Live Richer in Your 20s

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