financial practices to begin in your 20s

8 Smart Financial Practices To Begin In Your 20s If You Want To Retire Early

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We get it – not many people start thinking seriously about retirement in their 20s. You might not have considered what you want for your middle and later life beyond seeing some of your earnings invested in an employer pension plan.

Retirement might feel like a distant nebulous concept, but it will arrive sooner than you might realize in your 20s. Planning in your 20s makes the most sense, as you will have fewer commitments on your time and money, and you’ll have an easier time putting decent money aside.

For people who want to retire early, starting the ball rolling in your 20s is critical. You’ll be able to get a head start and have a comfortable base to build upon throughout your life. Life can throw plenty of curveballs at you over the years, not to mention the many milestones throughout your life that can impact your finances: weddings, children, ill health, and more. Starting early is the best way to make yourself financially strong throughout your lifetime.

1. Keep A Close Eye On Your Credit Score 

Many people in their 20s think about credit scores with a sense of dread – these confusing numbers that can make or break their dream of owning their own homes or taking out loans for essential purchases. Credit scores are actually simpler than you might think and easier to manage than it may feel at first. The key is to keep checking your credit score regularly; knowledge is most certainly power when you’re building up your credit score. The steps you should take include the following:

• Checking all details are correct and updating with incorrect information when necessary.
• Alerting the credit score company and your bank if it appears that fraudulent activity is present in your credit score information.
• Paying all your bills on time every month.
• Taking out credit and being smart with how you use it.
• Looking at your credit health regularly.

2. Start Building Your Emergency Safety Net 

If there’s one thing you can be sure of in life, it’s that it is never predictable. Most people will face both minor and major emergencies in their lifetime; a car breakdown, unexpected medical bills, the loss of a job and many more. To avoid the necessity of dipping into your precious retirement savings, you’ll need to have a strong safety net to fall back on in emergencies. Generally, three to six months of your normal income is what you should have banked for a rainy-day emergency – more if you are able to manage it.

3. Be Smart With Debt 

Many of us find ourselves with debt at one point or another in our lives – you might want to make a larger purchase, experience an emergency or get a little carried away when your first credit card arrives in the mail. Whatever the reason for your debt, you’ll need to get smart about how to handle it in your 20s and beyond. Here are some of the cardinal rules for dealing with debt throughout your life:

• Pay off the highest-interest debts first.
• Stick to 30% or lower credit utilization.
• Consolidate your debt to make paying it off easier – look for low- or zero-interest loans and credit cards.
• Always, always pay off more than the minimum repayments.

4. Get To Know The Stock Markets 

Investing in the stock markets can be a daunting prospect, but there really are fewer ways you could build up your retirement savings better. Trading on the stock market isn’t something you should do without plenty of planning and preparation; even the most seasoned traders can make mistakes and lose out big. You’ll need to understand the way the stock market behaves and how this can impact any stocks you own.

An excellent place to start is with a free stock market simulator, which can help you get a feel for buying and selling without any of the risk. You should also use things like economic calendars, which give you insights into different factors that could affect the value of stocks. Trading View’s fantastic economic calendar can help you learn how to predict changes in the stock market.

5. Look To The Future Of Your Career 

It goes without saying that the more you earn, the easier it will be to retire early. The math is simple: bring in more money each month, enjoy more disposable income to add to your pension pot. Many people are career-oriented in their 20s, but if you haven’t given it much thought, now is certainly the time to do so.

Look critically at your current role and determine what kind of career paths it has available to it; if the possibilities aren’t going to help you reach your earning goals, consider a career change or lateral move to a company with better future prospects.

6. Protect Yourself With Insurance 

Insurance is a vital backup plan in case of emergencies that could threaten your financial health. There are many types of insurance available that could protect you financially in the future; what you choose will depend on your lifestyle and particular risk factors. Some key insurances you could consider include:

• Health insurance
• Income protection insurance
• Auto insurance
• Life insurance
• Homeowner’s insurance

7. Put As Much As Possible Into Your Pension Plan 

Say you want to retire at 50 instead of in your 60s; you would need to make up for income you won’t get in your 50s and 60s now, in your 20s. You’ll also need to save more than you would if you retired in your 60s to bridge the gap between 50 and your national retirement age. This means funneling as much of your disposable income as possible into your pension plan, whether it’s an employer plan or a personal pension. Some financial experts say you should put as much as 70% of your earnings into your retirement plan in your 20s if you want to retire at 50.

8. Live Well Below Your Means 

It’s undeniable that your 20s should be a time of carefree fun – it is the unique time in your life when you have money coming into the bank and very few commitments to worry about. You should be aware, though, that if you want to retire early, you’ll have to balance partying and traveling with saving as much as possible.

Living below your means while still having a thriving social life can be tough but by no means impossible. Granted, it will be more challenging if you’re on a lower wage, but there are ways to reduce your outgoings without compromising on your lifestyle. You’ll need to curb your spending on things that aren’t strictly necessary: eating out, drinks in the bar and exotic vacations are all essential experiences for your 20s, but you should moderate how often you do each.


While retiring early might not be your number one priority in your 20s, it is best to bump it up the list – middle age can arrive sooner than you realize, and you’ll want to be prepared for it. There’s a lot you can do in your 20s to set you up for life without stopping you from doing all the things you love and enjoying your very own roaring 20s. You’ve got to be smart with your financial planning and build on the best financial habits; your middle-aged self with thank you in the long run!