Retirement by Decade Series: 3 Money Rules to Live By in Your 20s

You’re probably tired of being told about the importance of saving for the future. It’s hard enough to pay today’s bills without worrying about what life’s going to be like when you’re 65 or so. And let’s face it, no matter how great an idea saving is, it only works when you have extra money between paychecks. 

So, when you’re asked to think about how to prepare for retirement in your 20s, you’re probably more interested in how to build wealth in your 20s. 

Guess what? Wealth building and retirement planning are the same thing

Related: Where Should You Be Financially at 40? Retirement by Decade Series

3 Money Rules to Live By in Your 20s

Ameritrade asked millennials how they feel about money, education, and work in their annual “Young Money Survey.”1 The study highlights important issues younger people face with regard to finances, managing resources, and the lasting effects of acquiring debt. Shining a spotlight on these problems, along with offering tools to solve them, can help those in their 20s achieve financial independence, avoid money regret and keep debt under control.

Money Rule #1: Learn to live within your means now.

It’s easy to spend too much, especially with online shopping, app-based home delivery and peer pressure. “Money regret,” the feeling of dread you get when you realize you’ve overspent, is real but it’s also avoidable. By learning to live on what you earn, you will break the bad habits that create financial hardship.
Here are some steps that will help you get started:

  • Create a simple budget
  • Set aside an emergency fund (at least one month’s expenses, but two is better) 
  • Actively look for ways to share and cut costs
  • Delete apps that allow impulse purchases

Money Rule #2: Stop accumulating debt

Doing things that lead to debt in your 20s can follow you well into your 40s and beyond. It’s important to examine your attitude toward debt now so that you don’t find yourself carrying the weight of bad decisions as you build a career and start a family. 

Two key ways to make this happen are:  

  • Learn to live on less. This might mean buying used, making food instead of ordering in, using public transportation, living with roommates.  
  • Work more, even if you’re in school. Don’t let the idea of “being a student” give you an excuse to live off student loans. When possible, work a bit more and avoid racking up student loans and credit card debt.

Money Rule #3 Educate yourself about money and investing

You can take economics classes and still not understand how to handle your budget, much less have the tools to make money grow. You have to take it upon yourself to understand more about the world of investing, money management and wealth building. Don’t worry though, it’s a marathon and not a sprint, so spend a little time every week reading about money, the economy, investment and other financial topics.

In addition to our resource section, the following are reliable sources of information:: 

Investing in your 20s

How to invest when you’re in your 20s is a big topic that takes more than a little reading to fully understand. Knowing what assets to buy and how much you should be putting in a 401k in your 20s requires a deeper knowledge of how long-term investment tools work. This makes a financial adviser a great asset to get you started on the path toward financial freedom. 

Did you know that you don’t have to be wealthy to hire a financial advisor? You also have the right and freedom to use a financial advisor to help you make investment decisions for your employer-sponsored retirement plan.

Consider the following strategies against the specifics of your situation, like how much you earn, how much debt you have and what are your education and career goals.  

An investment portfolio for a 25-year-old will look different from that of a 35-year-old and even more different a decade after that.

Open a 401(k), especially if your company offers a match. 

401(k)s are a great tool for 20-somethings because the longer you have them, the more they can earn for you. Additionally, some companies actually match how much you contribute to your 401(k), up to a point. This is basically free money you get to save for your future. There are limits to how much you can save through a 401(k) because they offer significant tax benefits, so you’ll want to ask a professional to make sure you’re leveraging this tool the best way possible. 

Slowly increase your savings and investment contributions

If someone takes $100 out of your pocket, you’ll notice. If you spend an extra $15 on an evening out, you probably won’t realize the money is gone. The same applies to savings, so slowly ramp up your savings when you can and you’ll start growing your money. Putting an extra $25 to $50 every few months, on top of anything you have budgeted to save, will add up over time. Do the same thing with your investments, like a 401(k), to more fully see how saving small amounts over time really adds up.

Understand and learn how to balance risk

Investing isn’t something to be taken lightly, and risk is real, but when you’re young you can be a bit more aggressive with long-term investments. This is because you have time to allow stocks to recover and interest to build. This may simply mean investing a budgeted amount in stocks instead of leaving that same amount in a savings account. Don’t simply open an account online and start trading and buying stocks though; you should consult with a financial advisor before you get started.

Create short- and long-term money and investment goals

Short-term money goals include things you want to do with money now and in the next couple of years. For instance, building an emergency fund is an important short-term money goal. This allows you to deal with the incidentals that life throws at you without pushing you toward debt. This might also include paying off cars, clearing small debts and becoming more financially independent. Longer-term goals might be to max out your 401(k), save up for a house or pay off your student loan debt. 

At the end of the day, retirement IS a long way off and there is a lot of life to live in between now and then. Your ability to be prepared for it all comes down to how well you manage your resources, which you have plenty of time to learn about. Just remember, investing, money management and wealth-building doesn’t just happen.  You have to make it a priority. Educate yourself, partner with a financial advisor that has your best interests in mind and create the best version of your future possible.


1 Ameritrade. June 2019. “2019 Young Money Survey.” Accessed June 13, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Neither our firm nor its agents or representatives may give tax or legal advice. Be sure to speak with a qualified professional about your unique situation. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Lundervold Financial is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC. AEWM and Lundervold Financial are not affiliated companies. 00954861 06/21

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