Personal Finance at Every Age: Rules for Your 20s

With both your personal life and your financial life, no two decades will look exactly alike. Your needs and obligations in your 20s probably seem quite different from those in your 50s.

Each decade of adulthood comes with some general rules about spending and saving. If you’re young, these rules will give you a head start on living within your means. And at any age, they’ll help you meet your short- and long-term financial goals and prepare for retirement.
Liz Weston- Ally Bank
We asked Liz Weston, MSN Money columnist and author of the book The 10 Commandments of Money, to outline the personal-finance do’s and don’ts of your 20s, 30s, 40s and 50s. Here – in the first of a four-part series – Weston takes you through the Dos and Don’ts of your 20s.


…start saving for retirement. Don’t put it off while you pay off debt, save for a down payment, or pursue other goals. Retirement should be your No. 1 priority. You can’t make up for lost time.

… create a plan for paying down your debt over time. Prioritize paying off any credit card debt.

… start paying off education debt. If you have both federal and private loans, pay the minimum possible on the federal debt so you can prioritize paying off the private loans.

… put at least 20 percent down on any car you buy, and make the sure the payments don’t eat up more than 5 to 10 percent of your income.

… set up earmarked savings accounts, so you can save up for vacations and other such expenses.


… live beyond your means. Your “must-have” expenses – rent or mortgage, utilities, food, minimum loan payments, insurance – should not equal more than half your take-home pay.

… buy a home unless you’re sure you can stay put five to 10 years – which is how long it may take for appreciation to offset the cost of selling and moving.

… avoid the stock market. You have decades ahead to ride out its swings.

… go bare when it comes to health insurance. At the very least, buy a high-deductible policy that will protect you from catastrophic bills.

… fall into the habit of carrying credit-card debt.

What are your tips for people in their 20s trying to manage personal finances? How do your financial habits line up with those on Weston’s list?

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  1. 1
    Phillip Wessels

    I don’t think it’s very practical to suggest that the average young adult has a high enough income to where “must-have” expenses only take half of it. That means greater than 50% disposable income. I wish!

    Why don’t you make a post with suggestions for those with minimum wage jobs that need to move up? For example, one great suggestion I’ve heard is to always be applying for jobs to increase your chance of getting higher pay. Always have some nice clothes ready for when an opportunity emerges.

    Also, right now there is a special direct consolidation loan program for student loans (ends June 30th!). I consolidated mine and put them on Income-Based Repayment, which is a no-brainer if you are low income. Minimum payments can be as low as $0 and you have forgiveness after 20 years of payments (I suggest paying at least your interest). You can also put your loans on a temporary forbearance if you are in a tight spot (again, they continue to accrue interest). It took me a simple, quick phone call. Doing these things with federal loans can enable you to pay off more costly private loans quicker, or get necessities like a car and health care.

  2. 2
    Nick Reilingh

    The image in this post is located behind HTTP auth. When the page loads, the browser pops up an HTTP authentication window. This is a problem and a security issue for you. You should fix it.

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