Youth is the time to experiment and make mistakes. But if you let yourself live too freely, you could make blunders that you will regret for the rest of your life. This is especially true in finances. You should be able to go out and enjoy yourself, but you should also think seriously about your future. Here are a few things you should do in your 20s that will make the rest of your life that much easier.
1. Open a retirement account
Even if your work doesn't provide you with one. Most retirement accounts have a ceiling on how much you are allowed to contribute within a year, but there are no minimum required payments beyond your first deposit. Putting aside a small nest egg early will really build up over time. Ideally, you would still contribute a certain amount each month. But if your finances are really tight, you can just put some money away and forget about it. Read our explainer on the difference between Roth IRA and Roth 401(k) accounts for more.
2. Pay off as much of your student loans as possible
Forty percent of Americans under 30 have student loans. If you're one of them, use your 20s to pay off as much of the total amount as possible. Instead of just making the minimum payments, add a little extra each month. It won't be fun. However, it will be easier to use your extra income for this now rather than later in life when you will probably have other responsibilities like a mortgage payment. Lowering your total debt will also result in less accrued interest and ultimately less to pay off later on.
3. Build your emergency fund
If you don't have a savings account at this point, you really should open one. Contribute a set amount to it with every paycheck. Your savings will build up quickly if you're saving consistently. Ideally, you wouldn't touch this money unless an emergency expense pops up. However, dipping into it on occasion for a small treat now and then isn't too big of a deal. Having enough saved to cover unexpected car repairs or medical bills will save you from a lot of unneeded debt.
4. Limit unnecessary debt
Speaking of debt, limit how much you have. This sounds like common sense, but you should really be aware of how much you're spending on your credit cards. To limit how much you're spending, treat them like a debit card. Don't spend if you can't afford it. Do not ever use your credit card for frivolous items. That's the fastest way to spiral into even more debt.
5. Keep your credit score decent or excellent
Ideally, you should be able to pay off your cards every month. This should be easy if you're only using them for routine expenses. Paying off your entire balance will yield a pretty excellent credit score. But if you can't pay off your whole balance, make sure you're at least paying the minimum amount on time. Building and maintaining a good credit score will set you up for life. It will make it easier to get a better apartment or mortgage payment down the road.