The Personal Finance Advice Everyone In Their 20s Should Follow

Illustrated by Eline Van Dam.
Typically, our 20s are marked by a number of milestones, including graduating college, entering the workforce, moving up the career ladder, and, for some, getting married and starting a family. Each comes with a host of substantial lifestyle changes that require a solid understanding of your personal finances to avoid drowning in debt.
Certified financial education instructor Jamila Souffrant is a perfect example of how staying intentional with your money can lead to great success. Aside from providing coaching services through Journey to Launch, she’s most noted for saving $85,000 in one year, enabling her to buy real estate at the age of 22. “You can either subscribe to the idea that you need to work forever, pay bills, and be unhappy,” Souffrant tells Refinery29, “or you can decide to take control of your life and figure out how to use your job and all these other things to your benefit.”
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Feeling lost? In partnership with Adobe Document Cloud, we tapped into Souffrant’s expertise for tips that’ll steer you in the right direction. From investment advice to tax preparation guidelines, click through for everything you need to know about personal finance in your 20s.
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Illustrated by Eline Van Dam.
Find ways to maximize your income.

As a newly employed, full-time worker, what you start out making and your take-home pay might be less than ideal. But rather than feeling stuck with limited funds, Souffrant suggests picking up a side hustle to rake in extra cash. "Look at what you're good at," she says, "then, look at what services you can offer in relation to your strengths." Small tasks like doing hair, tutoring, or babysitting on the weekends can help — even if you don't generate thousands on day one. "The goal is to act to get some momentum going," according to Souffrant. "Try as many things as possible until you find something that works."
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Illustrated by Eline Van Dam.
Get organized before tax season.

According to Souffrant, gathering paperwork last minute to file your taxes is a big no-no. Rather than waiting for the inevitable, she recommends keeping track of important documents (e.g. W-2 forms, 1099 forms, other income statements, etc.) year-round with Adobe Document Cloud. The Adobe Scan mobile app quickly converts printed materials into digital PDFs to "alleviate paper clutter that causes stress," she explains, while Adobe Acrobat DC can help you organize all your documents in one place for easy access anytime. You're even able to protect and send your documents as an Adobe PDF with encrypted password protections as well as redact any sensitive information, if needed. Overall, both tools, Souffrant says, are great for saving more time — a huge benefit for tax filers.
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Illustrated by Eline Van Dam.
Stay intentional about why you’re saving funds.

A lot of personal finance requires putting mind over matter, Souffrant says. "You can Google how to budget and do all this stuff, but the piece a lot of people miss is that you, personally, have to understand what you’re saving towards." Whether it's an overdue vacation or a new car, keep track of your goals. If not, "It's very easy to see big pockets of money and think, It doesn't really matter if I pull from it," she warns.

Likewise, you never want to have so much access that you're tempted to spend money allotted for emergencies. As a general guide, Souffrant recommends stashing away enough to cover your expenses for at least three months. "People who don't have anything saved, should anything happen, are forced to put things on credit to pay them off," which could lead to more problems down the road.
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Illustrated by Eline Van Dam.
Create a budget that incorporates a debt-repayment plan.

One of the first steps to budgeting involves mapping out your expenses, Souffrant says. "You may think your expenses are too high and that you don't have enough money, but oftentimes people factor in more costs than what they absolutely need to live." Knowing exactly how much money is being spent compared to how much money is coming in will determine where you should pull back.

Reducing the amount and/or quantity of luxuries you pay for each month (e.g. cable television, fancy clothing, and dining out) can drastically improve your financial standing, Souffrant adds. "Maybe instead of allocating $300 towards hanging with friends, you decide to cut that figure in half and use the difference to pay off your debt." Consider it a temporary sacrifice to accelerate your journey towards financial independence.
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Illustrated by Eline Van Dam.
Invest, invest, invest.

Recent research gathered from Merrill Edge suggests millennials are scared to invest. In light of The Great Recession, they tend to prefer taking on the responsibility of monitoring and allocating their funds themselves, rather than risk losing money due to another financial crisis. That same report discovered a grave majority believe their savings accounts alone will be sufficient enough to rely on in 20 years. There's a huge problem, though: Money sitting in a savings account collects interest at a substantially lower rate than when placed in the stock market, according to Souffrant.

Not sure where to invest first? Index funds are a great option because "all of your money is spread out over several different companies," she says. Therefore, you're able to withstand any negative market fluctuation should individual stocks dip. The most important thing to remember is that buying stocks is a long-term decision — so don't panic: "If you keep your money in, it will eventually bounce back. And the longer it's in there, it'll grow."
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Illustrated by Eline Van Dam.
Establish credit the smart(er) way.

A credit score, in the simplest sense, is what lenders use to determine whether or not you're a dependable borrower. There are a few different types; FICO scores are the most well known and feature a range between 300 and 850. According to Experian, a top three credit reporting agency in the U.S., a FICO score of 700+ is considered good, while 800+ is excellent.

One of the fastest ways to build credit is by using a credit card, but it should always be used to your advantage with discipline — not like it's free money, Souffrant explains. "The way [credit cards] become a liability and a disadvantage is when you rack up debt without paying it off." And yes, debt accumulates interest, too.

Credit card application rejected? That's okay. "[Credit] is really all about taking a look at one’s overall payment history," she says, "so as long as you’re not defaulting on purchases or bills in your name, that’s also a way to establish it."
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Illustrated by Eline Van Dam.
Plan for retirement now.

Similar to stock investing, the earlier you save for retirement, the better, according to Souffrant. If you've been offered a 401(k) plan, she suggests enrolling ASAP, especially if your employer also has a matching program. "Say your company will match you up to your 5%: Your goal right off the bat is to invest the 5%, because that figure has already been worked into your whole compensation package." When you don't match or do nothing at all, you're losing out, she continues.

For those who are without access to a 401(k) plan (or anyone wanting to contribute more than what's allowed by law), Souffrant says they can open up either a Traditional IRA, Roth IRA, SEP IRA, or Simple IRA account. All of these accounts serve the same purpose, which is retirement planning, but each has set restrictions worth investigating beforehand.
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