How to Save Money in Your Twenties

Hi readers! I hope all is well in your world this week. Mine has been busy, but good. I really can't complain! Today's topic is something I've spent a lot of time thinking about. As a young professional, I feel as though I'm in a great phase in my life. I work for a great company, do a job that I enjoy (most days!), am financially independent from my parents, and am able to pay all of my bills while having a little left over for fun. But, finances can be tricky in your twenties. Not to toot my own horn, but I feel like I got on the right track pretty quickly from a financial perspective right out of college. I can't pretend to have gotten things taken care of on my own- I am very blessed to be surrounded by people who have great advice to offer from a financial perspective! On the flip side of that, I have also seen the financial struggles of people dear to me and my family during the economic recession that many are still bouncing back from. These experiences have given me a unique view on my finances and have allowed me to take charge from day 1. I want to share some insight with you so you can better understand how to save money in your twenties!

Thinking back on my initial job offer with my company, I was not thrilled with my salary offer. I was familiar with the cost of living in Atlanta, but I was going to be moving upon the acceptance of my position and was not sure what my salary would do for me in my next destination. I was pretty upset to be honest when I looked things up! It wasn't pretty. Thankfully, I signed on with a training program that had an increasing salary structure as I completed the phases and was able to live more comfortably as I moved through my program. Even though I felt strapped for cash and couldn't shop as much as I felt I needed to (getting a job required an ENTIRE wardrobe change for this gal! I couldn't wear Nike shorts and sorority tshirts every day), I decided to begin investing in my 401k immediately. I work for a company who offers a matching program up to a certain percentage of your salary. Y'all. That means FREE money from your employer for when you retire. Please, if you aren't sure, check to see if your company does this and opt-in for the maximum they match. I promise that you won't notice the small percentage missing from your paycheck! This is also the easiest way to save because it's already deducted before your paycheck is deposited into your bank account, so you never really know what you're missing! With all of the changes going on with Social Security and the instability of our economy, we have no idea what we will need by the time our generation retires. Saving early and diligently will absolutely help.

With that being said, I also believe it's important to have additional savings outside of a 401k. It's recommended to have 3-6 months of living expenses in an easy-to-access savings account as an emergency fund. Calculating this value is a great exercise because it forces you to look at your required costs vs extra costs (a great place to start formulating a budget...). Set this emergency fund as a goal and really do what you need to in order to build it quickly. So what if it means drinking water instead of soda at lunch? Or ordering frugally at happy hour? Or skipping the extra trips to Starbucks? You will survive, I promise. Establishing this fund ensures that you can live if anything happens to your current income flow and should be a priority. Oh, and once you've accomplished this? LEAVE IT ALONE. Don't dip into it next time Lilly or Nordstrom has a sale- you'll regret it if you ever happen to need this fund.

On top of an emergency fund, you may want to set an additional savings goal depending on where you are in your life. Do you want to purchase a new car or your own place? You'll need a down payment. How about replacing your hand-me-down furniture? That's not cheap. Are you going to be financially responsible for your wedding? You might want to start getting some extra cash set aside. Regardless of your goal, this is a great way to keep adding to your savings. Take a look at what you'd like to save and how long before you want to do so. This will allow you to break down what you need to save every month. I am currently allowing myself more flexibility here than I did with my emergency fund, but I do my best to keep track of extra spending so I can make up my shortcomings the next few months. I do this so my end goal isn't disrupted. This girl is hoping to buy when I move next, so I have a ton of saving to do!

As I mentioned before, bugeting is a great idea when you're first starting out. Getting paychecks larger than you've ever gotten before can trick you into thinking you can spend freely. Now, sometimes that is true (please refer me to your company if you have this kind of job) but more often it's an illusion. Required spends tend to increase when you're getting a full-time paycheck and need to be taken care of first before spending for fun. You should use some sort of visualization (I used Excel) to identify all of your earnings and spendings each month. I recommend splitting into sections with income, required spends (rent, car, gas, heating, power, etc.), and optional spends (eating out, concerts, shopping, etc.). This helps you to identify areas that you can have more flexibility in vs. those that are consistently there month to month. If you'd like more information on how I set up my budget, please send me an email and I'd be happy to go into more detail with you!

I hope you find my experiences useful and are able to start saving ASAP if you aren't already!

How are you saving? Do you have a savings goal? How do you prioritize your savings efforts?