How To Be Financially Stable In Your Early Twenties

July 30, 2020

early twenties financial tips

The idea of being financially stable is something everyone strives for, but it’s becoming increasingly difficult in today’s society. With minimum wage just about covering the costs of necessities such as rent, food, and transport, it’s no wonder so many young people are still living with their parents by their mid-twenties. I’ve always been reasonably good with my finances, but I can hands down admit that there have been some months where I didn’t know where some of my money went. For that reason, below are some examples that might help you fatten up your savings on minimum wage.

Outline different savings plans

You’ll have to be careful with this one. While having a separate savings account is crucial to help keep you on track, opening too many different accounts in a short period of time can have a temporary negative effect on your credit score. Despite that, over time it would be sensible to have a main account, a designated savings account, and then a separate retirement savings account. So, before you even consider any tactics for saving money, you should first work out exactly where your money is going first and where you can start saving, and how. You could also put aside extra money as the year goes on, for special occasions like Christmas or birthdays, that way you won’t have to start dipping into your other savings accounts here and there.

Managing monthly income

Split your monthly income into multiple and specific outcomes. Ideally you should spend no more than 35% of your monthly income on rent or a mortgage. So for example, a monthly salary after tax of around £1,500 ($1,964 USD) equals £525 ($687 USD) just on rent. If you can find housing for cheaper that’s either just as nice or requires a bit of DIYing, then go for that option. Here’s an example of a quick breakdown of financial management, if you start on a salary of approximately £21,000 ($27,500 USD) (around £17,821.80 or $23,337 USD after tax):

  • Rent = £525 ($687)
  • Food = £120 ($157)
  • Bills (Water, electricity, internet) = £150 ($196)
  • Car payment = £100 ($131)
  • Petrol = £60 ($79)
  • Council tax = £75 ($98)
  • Phone contract = £40 ($52)
  • Savings fund = £200 ($262)
  • Retirement fund = £50 ($65)

TOTAL = £1,320 ($1,729) (with £165.15 / $216 leftover)

TIP: Living with a roommate or your parents for a year or two is an excellent way of saving money on your rent. Using the example above, you can save around £200-250 a month. It’ll reduce bills and the cost of council tax.

This plan might seem daunting but, remember that your savings don’t always have to go completely toward a house or something “sensible.” Putting a large chunk of money away into your savings each month just means that if you want or need something later on, you’ll have the funds for it. Always remember to leave yourself a little bit of spending money outside of your savings too though, in case you need the extra money for something. You don’t want your budget to be too tight.

Become a minimalist

You don’t have to necessarily stop buying things you want entirely. By buying only the things you need or absolutely want—things that you know will be worth the money—you’ll end up saving a lot of money in the long run. So, spend some time re-evaluating what you value most, and avoid following the latest fashion and gadget trends. Buying quality items that last means you’ll end up buying less often, and you’ll be replacing things less frequently too. You’ll notice the money adding up in your account in no time, leaving you with less of a financial burden and more opportunities to fund things in your life that matter to you. Why reduce the quality of a holiday for the sake of buying too many new tops to bring on the trip?

TIP: Don’t binge on social media content that will not only make you feel bad about not having random junk, but that will encourage you to spend money pointlessly.

Limit drinking and partying

Reading more, finding new films or TV shows on Netflix, and even exercising are far cheaper alternatives for entertainment than weekly nights out to clubs and bars. Cutting out the frequent drinking and nights out can really help save you money. That doesn’t mean you can’t or shouldn’t go out at all, but limiting how often you go partying and even cutting out alcohol completely can really be beneficial. Plus, the money you save can be spent elsewhere, like the occasional trip out to a restaurant or the cinema, which in the long run will come out far cheaper.


Start small with your hobbies. If you want to invest in a hobby like gaming, go for it. Just be careful not to invest in a super expensive computer until you have the right amount of funds, and make sure you don’t take on too many hobbies at once. If you want to have more than one hobby, why not try have one which requires a little bit more cash like gaming, and then something cheaper like reading or watching films on Netflix or Amazon Prime. Don’t try and take on too many hobbies at the same time that will require money leaving your account every month, or else the costs will just pile up nonstop.

Get a money tin

Buy a money tin which you can only open once—either a money tin or one of those cute money pots that you’ll be sad about breaking open, because they’re so pretty. Make it a habit each time you go out to take some money out from the cashpoint to put inside the pot. Even if you took out £15 a week, that’ll come up to £780 a year guaranteed. You could use that as an emergency fund in case something happens to your nearest banks or cash points and you’ll need physical money. Or, you could even just save it up for an end of the year treat like a holiday. This is a simple but highly effective tactic for saving money without even realizing.

Transfer odd money between accounts

If your bank balance ends on a random number, transfer that spare bit of money into your account each time. For example, if you happen to have £523.47 in your main account, transfer £3.47, or if you really want and can afford to then put aside the £23.47, into your savings account. Again, the money in your savings will slowly but surely begin to creep up.

Look into getting a tiny house (or a flat)

That’s right. You must be wondering how buying a house will help your finances, but investing in a quality tiny home or a decent flat that could use a little TLC, and which doesn’t cost you an arm and a leg, can help you save so much money in the long run. Falling into the mortgage trap might be something you want to avoid, so buying a tiny home or a decent sized flat that you could pay off in five years or even less could be an ideal way of fattening up that saving account of yours. Don’t feel pressured by society to get that 5-bedroom detached house with a double garage when you don’t need it.

Ditch the credit card

You can still have a good credit score or build up a credit score without an actual credit card, it’ll just take a bit longer to build up. Personally, I don’t like credit cards. I think they’re evil, and that’s no exaggeration. If you can, try to avoid spending money you don’t have (with the exceptions of student debt, or maybe a first-time car or flat—since it’s better to invest in a decent first car than a first piece of rubbish, and no one has the money to buy a first house outright). Borrowing money which you don’t have, especially when at university or being just fresh out of university, can really hurt your finances and your credit score. Long story short, just avoid credit cards, at least for as long as possible. And if you do get one, pay off your bill completely each month. To put it simply—if it’s something you can afford to buy with a month of two of saving, don’t rush to get it and end up putting yourself in debt because you couldn’t wait.

Start a retirement fund early

I know this article is about your early twenties, but honestly it just makes sense to start your own personal retirement fund as soon as you can. Even if you add £50 in a month, by the time you’re ready to really start contributing to your retirement you’ll already a nice amount to start you off. Let’s say you want to really start contributing to it once you turn 25 (a smart move, I think), that’ll be £50 a month for 5 years which equals £3,000. It might not sound like a lot but, considering the majority of people don’t even having savings when they’re older, it’s way better than nothing.

How do you ensure your financial wellness as a twenty-something?

Related: These Women-Hosted Finance Podcasts Help You Manage Money Like A Pro

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