13 smart financial moves to make before turning 30
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Make money management a priority in your 20s to get ahead.
Money. We’re all trying to earn it, save it and make it stretch a little bit further. As you inch closer to 30, your financial responsibilities start to stack up. But with time on your side in your 20s, you can start saving, investing and making smarter financial decisions now for a better position later in life. A few rock-solid ways to do that …
1. Create a budget
Smart money management starts with a solid budget. A budget will lay out your spending in black-and-white and help you identify whether you’re on track to your savings and retirement goals.
It doesn’t need to be complicated. Follow these steps:
- Calculate your after-tax income. Include your take home pay as well as any other income.
- List your fixed expenses or the things you need to pay for every month. Think rent or mortgage payments, bills, groceries, insurance and gas.
- Add any debt you have and the monthly repayments for each.
- Write down your wants. These may include a gym membership and the money you spend on entertainment and eating out, for instance.
- Now that you know how much money you have coming in and going out each month, you can revise your spending habits to meet your spending goals. There are budgeting apps that can help you with this. We like Mint.
2. Build an emergency savings fund
Life is full of unexpected and expensive surprises. At 30, you probably have a lot more responsibility than you did five or 10 years ago. It’s not fun to think about, but what would you do if you lost your job or had to deal with a medical emergency or a sudden car repair?
Four in 10 Americans can’t cover an unexpected $400 expense in cash, according to a report by the Federal Reserve Board.
To avoid ending up in that position, try saving three to six months’ worth of living expenses. Depending on your situation and financial responsibilities, you may need more or less — but the key is to start saving as soon as possible. This is your rainy day fund and can help ease your anxiety about money.
As for where to stash it, consider a high-yield savings account.
Finder’s top picks for under-30s:
Set it and forget it
Our banking expert Ryan says: “My best savings advice is to pay yourself first. So either have a percentage of your earnings go straight to a savings account by splitting your direct deposit, or set up automatic transfers shortly after payday. You’ll learn to live without that money.”
3. Keep tabs on your credit score
Your credit score is a three-digit number between 300 and 850 that reflects how you’ve used credit in the past. In other words, it paints a financial picture. It can affect your ability to rent an apartment, buy a home or purchase a car. It can also drive up your insurance rates.
If you don’t know your credit score, chances are you can fix that right now. Many of the top credit card companies list credit scores on their monthly statements. Otherwise, Discover and Capital One allow everyone to access their credit score whether they’re customers or not.
There are a few ways to boost your credit score:
Order a copy of your credit report. If you spot any errors, file a dispute with the three credit bureaus.
Make timely payments. This proves you’re a responsible borrower.
Use 30% or less of your credit. For example, if your credit limit is $1,000, keep your balance below $300.
Avoid too many hard credit enquiries. Every time you apply for a loan or credit card, it’s listed on your credit report as a hard inquiry. This may drag down your score, so do your research and limit the products you apply for.
Keep an active credit account. The length of your credit history is important, too. Show lenders you have a positive track record of borrowing and repaying by maintaining at least one credit account. And don’t close old, healthy credit accounts.
4. Choose a credit card that will work for you
Your 20s are, in part, about establishing good financial habits. A big component of that is building credit, which is where a credit card comes in.
If you can use a credit card wisely now, you’ll thank yourself later.
The type of card you choose matters, too. As we mentioned, the age of your credit history counts, so you want to hold onto your first credit card for as long as you can.
Our advice? Open a card that offers rewards that align with your spending. If you’re not getting paid for your everyday purchases, you may be missing out.
Finder’s top credit card picks for under-30s:
- The Petal Visa Credit Card doesn’t require a credit score to apply. With their rewards program, you’ll get a higher cashback rate (up to 1.5%) if you make on-time payments. There are no fees, and credit limits range from $500 to $10,000.
- Chase Sapphire Preferred® Card is ideal for jetsetters who want to earn points on travel and apply their rewards toward flights. If you spend $4,000 on purchases within the first three months of opening the account, you’ll score 60,000 bonus points – and put $750 towards travel when you redeem through Chase Ultimate Rewards.
- Blue Cash Preferred® Card from American Express has a refreshed rewards program that includes cashback categories where millennials spend most, such as streaming services, transit costs, groceries and gas. If you spend $1,000 on purchases in the first three months, you’ll receive a $250 statement credit. American Express also offers a 0% intro APR on purchases and balance transfers for 12 months.
Think long term about your credit card
Our credit cards expert Megan Horner says: “If you’re a first-time credit card user, chances are you’ll be opening up a student credit card. Choose one that can be upgraded to a great rewards card later down the line. Since part of your credit score is determined by the age of your credit history, you’ll want to upgrade that student credit card — and keep the same account — instead of opening a new account. You may want to open up other cards later in life. But for now, just know that you’re going to be married to that first card.”
5. Refinance your student loans
Most 20-somethings graduate college with student loan debt. And they’re not alone. According to the Consumer Finance Protection Bureau (CFPB), private and federal student loan debt collectively adds up to $1.4 million.
While most student loans have payoff plans stretching from 10 to 20, 25 or 30 years, you want to make a serious dent in your debt before that. Thanks to interest, the longer you take to pay down your student loans, the more you’ll owe.
Know how much interest you’re paying
Our loans expert Aliyyah says: “You can check your loan statements to see how much of your monthly payment is going to principal and how much is going to interest. From there, you might be able to change your payments to contribute more to the principal and pay down your debt faster. If your interest rate is too high, that could be a sign that it’s time to refinance.”
By refinancing your student loans, you may be able to lower your monthly payment, extend your payment terms, or drop your interest rate by several points and save thousands over the life of your loan. If you have several loans, refinancing will also put them under one umbrella.
If you decide to refinance, always shop around. Each lender places their own emphasis on things like income, employment and credit score, so compare lenders to save more.
Finder’s top pick for under-30s:
- Sofi offers a competitive rates and many member perks, such as a 0.125% rate discount on additional loans and referral bonuses. Depending on your borrower profile, you may be preapproved online in minutes.
6. Get your debt under control
Student loans aside, start paying off any personal debt you’ve accumulated. Which, if you’re like most young Americans, may include car loans, credit cards or a mortgage. If you can do that, you’ll enter your 30s with a focus on building wealth rather than paying off debt.
When it comes to making money moves, having a plan always helps.
The first step is creating a budget. This will help you to monitor your finances and make sure you’re not living beyond your means.
The second step is making a debt-free plan. There are a few ways to approach this:
- If you have multiple debts, begin by chipping away at the highest-interest debt.
- Pay more than the monthly minimum payment.
- Consider a credit card with a 0% intro APR on balance transfers. Getting a new credit card might seem counterproductive, but this means you won’t be charged interest on a balance you transfer from another credit card.
- Research personal loans. If you can find a loan with lower interest rates than your existing loans, it may be worth consolidating your debt under that. A personal loan can also help you to start or finance a new business venture.
Finder’s top pick for under-30s:
Do the math
Our loans expert Aliyyah says: “Having a high amount of debt or multiple debts with different companies can be overwhelming. If you list them all in one place and know how much you can afford to pay down each month, you can start to calculate when you’ll be able to fully pay the debt off.”
7. Review your car insurance
You could be paying too much for car insurance. Before signing the dotted line for another year, make it a habit to review your coverage.
If it’s no longer working for your needs or budget, explore your options.
Compare car insurance every year
Our car insurance expert Roslyn says: “You could save hundreds by switching car insurance. Why? Because you’ll typically get more discounts for switching than for staying loyal. Analyze your coverage every year to make sure you’re not overinsured or underinsured. It also pays to compare car insurance when you turn 25, change jobs, move or get married.”
Finder’s top picks for under 30s:
8. Invest in renters insurance
You’ve probably worked hard to create a beautiful home. Those possessions are worth protecting.
Renter’s insurance covers you in case your stuff is stolen or if your home is damaged in a storm or accident. It can also take care of the costs if someone gets injured in your home.
Less than half of renters get renters insurance, but consider buying a policy if you have more than a few hundred dollars’ worth of possessions. It may be required by your landlord or management company, too. Before you move into a new place, check your lease agreement to see if you’re required to buy renters insurance. You might be breaking your lease if you don’t show proof of coverage.
If you’ve always simply gone with the company recommended by your landlord, now’s the time to shop around. You can get basic liability up to $100,000 and personal belongings coverage up to $10,000 for $10 to $15 a month.
Finder’s top pick for under-30s:
Think about lowering your deductible
Our renters insurance expert Roslyn says: “If you already have renters insurance, you’ll pay an extra $5 or so a month by switching from a $1,000 to a $100 deductible, so it’s worth looking into lowering your deductible.”
9. Protect your family with life insurance
Do you have loved ones who rely on your income? A life insurance policy can offer peace of mind and a sense of financial security for you and your family.
Term life insurance policies last for a set period of time — usually 10, 20, or 30 years — and the premiums stay the same for the life of the policy, making them easier to factor into your budget. Insurers reserve their best rates for young, healthy applicants, so apply as soon as you identify a need for life insurance.
When you’re calculating how much life insurance to buy, consider both your current financial situation and your beneficiary’s future needs.
Finder’s top pick for under-30s:
Don’t overpay for life insurance
Our life insurance expert Zak says: “Term life insurance is by far the cheapest and most practical type of life insurance policy. It allows you to pay only for what you need, when you need it. Also, by applying for term life insurance when you’re young, you may be able to lock yourself into the best rates for many years to come.”
10. Refinance your mortgage
Are you a homeowner? Congratulations — that’s a significant accomplishment for someone in their 20s.
Refinancing a mortgage means paying off your existing loan and replacing it with a new one. There are a few situations when refinancing makes financial sense, like if you want:
A lower interest rate. Mortgage interest rates fluctuate with the market, so if you’re still paying interest on an old rate, consider refinancing to take advantage of lower rates.
A shorter term. Maybe you’re in a better financial position than you were when you first took out a loan. If so, you can refinance to a shorter term and own your home faster.
A fixed-rate mortgage. With adjustable-rate mortgages, the repayments are unpredictable. If you’d prefer steady payments, you can refinance to a fixed-rate mortgage.
Cash-out. Do you need money to finance a large purchase? You may be able to apply for a cash-out refinance.
A lower interest rate could translate to thousands in savings
Our home loans expert Jing says: “Refinancing your mortgage is one of the best financial moves you could make at any age if you can lock down a rate lower than your current APR. For example, you’ll save over almost $55,000 over the life of your loan if you refinance a 30-year $350,000 mortgage with a fixed rate of 4.3% into a new, lower rate of 3.54%.”
Finder’s top pick for under-30s:
11. Negotiate your salary
Unfortunately, most employers don’t hand out regular pay raises. You need to be proactive and ask for what you want.
Salary negotiations are delicate conversations, and there’s a right and a wrong way to ask for a raise. Before you go barging into your boss’s office, do your homework.
Be honest and figure out if you’re entitled to a raise. Are you meeting your goals? Does your job description reflect the reality of your day-to-day work? Are you an asset to the company? Once you’ve answered these questions, investigate the typical salaries for someone in your position.
If you believe you deserve a raise, set up a meeting with your manager and/or HR rep — and prepare for it. List the reasons you deserve a raise and quantify them if you can. Depending on your job, you could talk about sales figures, client wins, media exposure or engagement.
12. Start saving for retirement
Retirement may be the furthest thing from your mind, but ideally, you want to invest your money now to set yourself up for a comfortable financial future.
If your company offers a 401(k) program, start contributing as much money as you can to it — especially if your company matches your contributions. Otherwise, you’re throwing away free money.
Your employer’s contributions are in addition to your standard salary. Your 401(k) isn’t taxable until you withdraw the money when you retire, which means it’ll grow tax-free.
If you’re maxing out your 401(k) contributions, look into funding an IRA or Roth IRA next. Income taxes are at a historic low, but there’s a rising federal deficit, so we can’t rule out a tax increase. An IRA can protect some of your income from higher taxes and boost your retirement savings.
Have a big-picture view toward taxes
Our banking expert Ryan says: “Consider where we’re at tax-wise in relation to the last 100 years and where taxes are likely headed in the future. Both types of retirement accounts — IRAs and Roth IRAs — offer tax advantages. You either get that benefit at today’s tax rate or at the rate in place when you retire.”
13. Become a smart shopper
Once you’ve addressed your major expenses, think about ways to save on your everyday purchases.
To spend your money wisely, do these two simple things:
Shop around for the best deals. Online retailers frequently run sales and promo offers, and many offer discounts for signing up to their email newsletter or shopping on the app versus the desktop site. Save more at the checkout by searching for coupon codes.
Invest in high-quality, timeless pieces. You’re better off spending more on beautifully made clothes than cheap items that might easily tear or shrink.
Sometimes a larger investment makes more sense
Our shopping expert Michael says: “Don’t shy away from investing in essentials like appliances and mattresses, or even clothing and technology if you know they’re going to last. Purchasing one good microwave is a better investment than buying a new one every time it blows up.”
Start checking off these money management milestones
The best time to begin managing your money is right now. If you can get a handle on your finances in your 20s, you’ll be one step closer to living debt-free and focusing on investing and building wealth in your 30s.
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