Fact: 20-somethings are among the most financially confident people in America.


But, really, that’s what we found while researching our latest white paper on financial confidence—and, initially, it surprised us too.

But it makes sense: Sure, Millennials may have some daunting student loans to pay off on entry-level salaries, but they typically have few other major financial responsibilities. Plus, with some hard work, they can set themselves up for plenty of salary bumps down the road.

If you look at it this way, the financial outlook for a 20-something is pretty good—until about the age of 35.

That’s when financial confidence tends to take a nosedive, thanks to a combination of earning potential plateaus and demanding responsibilities—like kids and mortgages.

Now, we realize we’re not painting a pretty picture here, but there’s no reason to panic. Simply knowing what’s ahead—and taking steps to prepare for it—can help put you ahead of the game.

“You don’t have to live an austere lifestyle to mitigate those challenges,” says Latasha Kinnard, author of 20-Something & Rich. “You just have to make decisions that balance the benefits between your present self and your future self.”

Ready to grab onto this golden opportunity to help change the course of your money life? Then consider making these savvy, net-worth-boosting moves in your 20s—and you may reap the benefits for years to come.

1. Stash 10% Into Retirement

“If you get into the habit as a 20-something of spending just as much as you make, it’s very hard to change that pattern,” says Lise Andreana, a CFP and author of No More Mac n’ Cheese! The Real-World Guide to Managing Your Money for Twenty-Somethings.

So start training yourself to live on less in your 20s by automatically funneling a minimum of 10% of your paycheck into your 401(k) or IRA account, Andreana says.

That may seem like a laughable sum—especially if you’re not making much—but there is a significant plus to pushing yourself to save at an early age: Your money will have more time to benefit from compound growth.

And if you keep stashing away a steady percentage as you bank a few raises, by the time you hit your 40s, you’ll likely have a pretty sizable retirement account balance—and hopefully get to a point where you’ll be comfortable putting away $1,000 or more each month without breaking a sweat.

2. Get a Money Discussion Going

As a member of the Millennial cohort, you have a distinct advantage over your parents: “Between Facebook and Twitter, Millennials tell people everything!” Andreana says.

And that can be a good thing when it comes to your money.

Allow us to explain: By the time you get to your late 30s and 40s, you may not feel comfortable sharing salary details with your friends, or how much you spent on your last vacation—your paths will have diverged too much. But now is the time when you can leverage your openness to make solid financial decisions.

So tell friends your budget for the month, so they don’t choose a restaurant that will break it. Email a trusted peer working at another company to get the dirt on his benefits package. And put up a social media post asking everyone which bank they recommend.

These tidbits may help you save more money, negotiate higher pay, and find a bank that offers a valuable credit card rewards program—all perks that can, of course, up your net worth.

3. Invest in an Insurance Policy—for Your Money

You wouldn’t dare forgo health insurance, would you? Without it, you could end up in big financial trouble—and foot a $55,000 bill just for getting your appendix removed.

That’s exactly why every 20-something should consider having an emergency savings account: Failing to fund one could mean you’re vulnerable to racking up credit card debt just to pay for unexpected expenses that crop up—a habit that could keep you in the red for years.

But that’s not the only reason to prioritize this net-worth-boosting to-do. “Without an emergency fund, not only do you not have something to fall back on, but you also don’t have that sense of confidence you need to move forward on the things you want to do with your finances,” Kinnard says.

Translation: Once you’ve proven to yourself that you can successfully put away six months of net income into an emergency fund, you can confidently consider taking on bigger goals, like stashing away steady cash in your buying-a-home, travel-the-world, or investment accounts.

4. Pursue an Advanced Degree—if the Math Works

If you’ve heard that getting a diploma from a top MBA program can increase your lifetime earnings by several million, you might be tripping over yourself to enroll immediately.

In many ways, your 20s could be the perfect time to go back to school. The student mindset isn’t too far in the rear-view mirror, and you’d only forgo an entry-level salary if you were to enroll full-time.

But here’s the catch: Furthering your education isn’t always a slam-dunk when it comes to investing in your future. “The potential earnings have to be worth the costs,” Andreana says.

So break out your calculator, and add up how much it’ll cost you to enroll, plus the earnings you’d be giving up if you decide to become a full-time student. Then compare that with how much the degree is likely to increase your income—and how long it would take you to recoup your expenses.

For instance, if you leave a $50,000 job for two years, and pay $60,000 in tuition, then you’re already out $160,000. A $10,000 raise after you graduate means it would take you 16 years to recover what you spent—or more if you took out student loans and have to pay interest.

The final step in this exercise is figuring out whether you think it’s worth it. Hint: In this case, it’s probably not.

5. Set a Deadline to Pay Off Your Student Loans

Knowing how to prioritize your student loan debt can be tricky. On the one hand, they tend to have lower interest rates compared to other types of debt, which may land them at the bottom of your financial priority list.

But on the other, they can shove your net worth so far into the negative category that it’s paralyzing. The average student left college in 2013 with more than $28,000 in student loan debt, and now needs to make payments on that debt while making only about $45,000.

If you don’t want to let student loans get in the way of your future priorities—like, say, becoming a homeowner one day—your 20s are the time to buckle down.

You can start by deciding on a specific date when you’d like to buy that home, for example, and declare that as your deadline to get out of debt and save up 20% for your down payment.

From there, calculate how much you’ll need to pay every month in order to wipe out your loans in time, and come up with a stricter spending plan that supports your goal.

“I know this isn’t necessarily something that you want to do,” Kinnard says. “But you can see the silver lining and understand that this is going to set you up for success for the rest of your life.”

A nice bonus? By the time your net worth is in the positive and you’re ready to put a down payment on your dream home, you can repurpose the money you were funneling toward student loan payments directly to your mortgage.

6. Don’t Blindly Accept a Job Offer

As you might expect, the career choices you make in your 20s can have a lasting impact on your future net worth. That’s why it’s crucial to thoroughly evaluate every employment offer you receive…and avoid making a decision based on salary alone.

“That would be an expensive mistake to make,” Andreana says.

It’s just as important to factor in the value of big-ticket benefits—like how much the company kicks in for health insurance premiums and retirement contribution matches—because they can amount to major savings over time.

Case in point: A 25-year-old making $30,000 with access to a company 401(k) match could potentially net more than $10,000 in additional retirement savings by 35, compared to someone who took a job that didn’t offer a company match.

So whenever you’re considering more than one job opportunity, rig up an apples-to-apples comparison.

Start by collecting all of the info you can about the benefits at each company. Then figure out things like: How much will you pay in out-of-pocket health expenses if you join Company A, which covers 80% of your insurance premiums, compared to Company B, which covers 75%? And assuming you funnel 7% of your paycheck to your 401(k) each year, how much would each employer’s match be worth?

Assigning a value to each benefits package—and then adding it to the salary numbers—can help you pick the job that’ll take your net worth to the next level.

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Updated 6/19/2020