Keys to Financial Success in Your Early 20s

(Photo by Phoney Nickle at flickr)

When you are in your early 20s, the idea of financial success may seem overwhelming, even impossible.

Chances are, you are working at an entry-level job and struggling to make even your basic expenses, such as groceries and utility bills. When you add cell phones and credit cards to the mix, you may feel lucky to be able to buy a beer at the end of the week, let alone save for retirement.

“How can I manage my money when I don’t have any money to manage?” is the battle-cry of the 20-something professional. But the fact is, the habits you develop now will shape your financial success for the rest of your life.

Start on a Budget and Stick to it

The first key to success is developing a budget that works. If you have problems sticking to your budget, or you simply don’t have enough money, don’t throw up your hands and give up. Track your expenses for a few weeks and see where your money is really going.

This process may surprise you, and it will also help you develop a more realistic budget that works for you.

Pay Your Bills on Time

The second is to make your credit card and bill payments on time, and keep track of your credit rating. Your credit rating is a virtual road map of your behavior with credit throughout your life, and it determines what kind of interest rates you can get on things like auto loans, home loans, or any other type of credit.

You may not be thinking about buying a house or even a car right now, but down the road, you’ll be glad to have a good credit rating when it comes time to do so in the future.

Make Sure You Save Something

Finally, make room in your budget for savings, even if it’s just a small contribution every week to an interest-bearing IRA. Retirement may seem far away, but the earlier you start saving, the more money you are going to make in interest. You can start by simply opening a savings account and ensuring more of your money goes there than to your credit card bill each month. If the credit cards are still taking away more, it’s time to cut down many of your expenses.

If you can manage to do this, you will be well on your way to a financial success story that you will be proud to share.