Budgeting 5 Financial Habits To Establish in Your 20s By Paula Pant Updated on April 29, 2022 Reviewed by Margaret James Reviewed by Margaret James Twitter Peggy James is an expert in accounting, corporate finance, and personal finance. She is a certified public accountant who owns her own accounting firm, where she serves small businesses, nonprofits, solopreneurs, freelancers, and individuals. learn about our financial review board Fact checked by Vikki Velasquez Photo: JGI/Jamie Grill/Getty Images Are you in your 20s? There's a decent chance you feel broke right now. You’re earning an entry-level salary while trying to pay off college debt. You may be living with roommates, eating pasta and bagels because it’s cheap. You can't imagine owning a home or driving any car that isn't a $2,000 beater. But despite your apparent lack of money, don't underestimate the power of this decade. Your 20s are an ideal time to set yourself up for a solid financial future. This is when you build the foundation that you'll stand on during your 30s, 40s, 50s, and beyond. How can you go about managing your money and establishing good financial habits in your 20s? Here are five tips you can start with today. 1. Live Like a Student for Longer Than Necessary You’re at a unique age where it’s socially acceptable to continue living like a broke student. Do yourself a favor and maintain this broke student lifestyle even after you get your first job and a few promotions. Keep living with roommates for as long as you can. Continue cooking dinner at home rather than dining at restaurants. Keep wearing clothes from thrift stores or discount shops. Follow the actions you took when you were a student without a decent paycheck. 2. Earn Extra Money Hustle during your spare time. When you were a student, you probably balanced going to school with working a part-time job during evenings and weekends. In other words, you balanced a full-time job being a student with an additional part-time job. Now that you’re in the workforce, there’s no reason you can’t continue with it. Balance your full-time job with a supplemental part-time job, even if it’s only 5 to 10 hours per week. This can help you make huge progress towards your financial goals. 3. Focus on Your Career Your 20s are a prime decade to focus on advancing your career. Give 110% of yourself while you’re at work and think carefully about career moves. Work at companies where you have a good chance of advancing up the ladder. Seek to meet the right people who can create a strong network of opportunities for you. It’s also okay to take a slight pay cut if it means getting to be in a position that has more room for growth. 4. Start a Retirement Account Open a retirement account and contribute annually or defer a portion of your income each pay period. A 401(k) is a type of retirement plan offered by employers in which employees elect to contribute a portion of their wages into a retirement account. The funds in the account are invested by a financial institution. In many cases, the employer may also match an employee's contribution up to a specific percentage of their pay. For example, an employer may match 50% of an employee's contributions up to a certain amount or percentage of the employee's pay. So, a 401(k) might be designed so that the employer pays 50% of the employee's first 6% of contributions—or 3%. Beyond 6%, the employer doesn't match any longer. However, the employee might be required to contribute the full 6% to qualify for the 3% match. As a result, it's essential to at least contribute the minimum amount needed to be eligible for the employer match since the employer is depositing free money. 5. Prioritize Debt Repayment By living like a broke student and earning extra on the side, you have an opportunity to repay your college debts or other debts. Be as aggressive as possible without harming your retirement account. You might have to figure out how to strike a balance between repaying debt, saving, and investing—but don't neglect any of these three categories. They're crucial to building your financial base. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Internal Revenue Service (IRS). "401(k) Plans."