Last Updated on August 12, 2022
Contents
Learn How to Save Money in Your 20s
Saving money in your 20s might seem like a far-fetched idea. How can you save money when you’re getting started in your career? Even if you find a job, you might not earn a lot initially. This is especially true if you’re working part-time so you can study. Saving money in your 20s isn’t impossible, but it takes practice and commitment.
Regardless of your age, saving money is a matter of habit. Adopting some sound money-related habits can save money even in your 20s. Explore how budgeting strategies and adapting to a different financial routine can teach you how to save money in your 20s.
Delay Purchases to Save Money in Your 20s
Why can’t I save money? You might ask yourself this question if you’re in your 20s and starting life on your own. Having monthly expenses and a limited budget is not easy. It takes practice to master your finances. It also takes some skill to avoid frivolous expenses. These are expenses that are not essential. Examples include:
- Clothes
- Makeup
- Eating & drinking out
- Subscriptions you don’t often use
In your 20s, you might be more tempted than ever to spend money on things you like. This is certainly not the case for everyone. If you fit into this category, you might want to apply a simple strategy that can help you save money. Try to delay your purchases. To do this, consider your priorities before each purchase. Ask yourself if you really need the item in question. If the answer is not necessarily, try to postpone that purchase.
You can practice by starting with a one-week delay. Let’s say you go into a department store and see a fabulous pair of jeans. You want to buy them right away. That is not the type of spending you would qualify as necessary, so take one week to decide. Go back to the store the following week. Do you feel the same urge to buy those jeans? Maybe not, which will help you better manage your spending.
There is a strategy for this money-saving approach. It’s called the 30-day rule. It involves the same mindset. The difference is a broader time frame of 30 days. You can practice this strategy for more significant expenses, for example, electronics. Take more time to consider those purchases since they have a stronger impact on your budget.
In essence, delaying your purchases helps save money by limiting impulse shopping. This happens when you buy things you want but don’t need.
There are different reasons behind this behavior. The need for gratification is one of them. Another can be the habit of spending on the spur of the moment. No matter the cause, delaying purchases can end impulse buying, which could mean more money in your savings account. It could also help you fix your credit fast.
Avoiding Debt to Save Money
Speaking of credit, another way to consolidate your savings in your 20s is by avoiding debt. You might already have a student loan on your shoulders. That might be more than enough. You’ll have to focus on paying it off for a while, which makes it all the more important to avoid additional debts. How can you limit your spending so you don’t take out any other loans?
You might want to try one of these strategies:
- Avoid getting credit cards.
- Don’t borrow money from friends or family.
- Try to pay more often using cash.
- Make a budget each time you go shopping.
Avoiding debts comes down to one simple decision, not borrowing money. If you apply the tips above, you might be able to limit your spending to your available finances. Paying more often with cash helps because it limits your spending amount. You can only use as much as you have in your wallet.
Not getting a credit card is also a good strategy. That means you’re not making new loans and don’t risk paying interest. Borrowing money from friends or family also means getting a loan. Even if you don’t incur interest, you still have to pay them back. The best recipe to avoid emotionally and financially burdening loans is not to get any.
How to Save Money in Your 20s by Spending in Moderation
How can you save money in your 20s without making any sacrifices? We haven’t tackled this dilemma yet and are not sure we ever will. For most people, saving money requires some sacrifices. There are many temptations when it comes to spending.
Your financial resources may be limited to an average income. You probably also have monthly bills and fees to pay. All this leads to a logical conclusion. Your money is limited, so you might also have to limit your spending to put aside some cash.
Spend in moderation by adopting a gradual approach. Pick a spending category each month and try to limit its budget. This means creating fixed spending categories first, which is also the basis of budgeting. The easiest way is to divide your expenses into three major categories:
- Essential expenses (food, gas, etc.)
- Monthly debts & bills (rent, utilities, car loan, etc.)
- Non-essential expenses (clothes, going out, etc.)
Make an expense reduction plan
It might be harder to reduce spending for the first two categories, which are more or less fixed. In this case, start with the third. You can also divide this category into several smaller ones. Then, for each sub-category, set an approximate monthly budget.
For example, allocate $70 to clothes, $50 to eating out, $40 to books and magazines, etc. After making a budget, set a goal. Try to spend 10% less on clothes this month. The following month, save 10% on eating out, and so on.
Start with small steps until you can cut all your expenses. The money you save should be stored separately. This way, you lower the temptation of using it. You can save it in cash or a separate bank account. Different budgeting apps can help you create envelopes for savings and for all the other expenses. Our experts reviewed some popular ones, such as Mint, YNAB, and Mvelopes.
How to Save Money in Your 20s Each Month
You could achieve this easier with a firm plan. We will walk you through some well-known budgeting strategies soon. Before that, we want to simplify matters and offer a simple and flexible method to save money. Start by setting a savings goal. There are three main possibilities:
- Your goal is to save some money each month (no specific amount).
- You want to save a fixed amount each month (specific amount, e.g. $200).
- You’re saving for one specific purpose (ex. a car down payment).
Depending on where you fit in, your savings efforts can vary.
Save money for a specific goal
If you need to save a specific amount for a new car, you might want to plan ahead. Calculate the cost of the car down payment. Then, establish a deadline. How soon do you need the car? If you want to buy it in six months, you’ll have to save more every month. You have more time if you’re going to buy it in a year. You still need to save money each month, but the amount you must put aside will be divided into smaller installments.
The method remains the same. You first establish the amount you need. Then, divide it by the number of months you have at your disposal. After that, you put that amount aside each month.
What about goals one and two, saving some money and saving a fixed amount monthly? You can save money in a similar way, even without a firm savings goal and deadline. Not having a specific expenditure-related purpose allows you to set flexible goals. Start by determining your savings capacity. For this, confront your income with your monthly expenses.
Let’s imagine you have a part-time job that provides a $1,600 monthly income. Calculate your monthly expenses. Add up all the regular costs (gas, apartment, etc.). These fixed expenses are easy to calculate. Then, approximate how much you pay for food each month. Add other expenses you might have.
At the end, you should have a remaining or buffer budget. In our example, this was $100. This is the amount you could save each month. It is a buffer budget you don’t have to allocate to a spending category.
Monthly income | Amount: $1,600 | Monthly expenses | Amount: $1,500 |
Gas | $200 | ||
The remaining amount after covering your expenses | $100 | Dorm cost | $800 |
Food & others | $500 |
You might not want to go through the hassle of calculating your monthly expenses. In this case, just consider your spending necessities, in general. How much money do you earn? How much can you save each month without major effort?
Save a specific amount each month
Some budgeting strategies promote a 10% monthly savings goal. One example is the 10% savings rule. This strategy is straightforward. It means saving 10% of your monthly income.
Does this work for you? If you feel the goal is too high, set a lower limit, such as saving 5% of your income. Experiment for a month or two with this percentage. See how it works. After getting used to the 5% goal, you could move further to 7%, and 10%.
Calculate how much you can achieve with each savings percentage. This will give you a perspective and motivation to continue saving. Let’s take, for example, the same $1,600 income. With the above savings goals, see how much you can save in six to 12 months.
Monthly income: $1,600 | |||
Savings goal | Monthly Savings | 6 month Savings | 12 month Savings |
5% | $80 | $480 | $960 |
7% | $112 | $672 | $1,344 |
10% | $160 | $960 | $1,920 |
By saving only 5% of this income every month (0.05 x 1,600 = 80), you end up with $960 (80 x 12) at the end of the year. Going a bit further to 7% means yearly savings of $1,344. With a 10% savings target, you achieve $1,920.
Calculating these outcomes will boost your ambition to save. You could visualize the result. This way, saving money will be a purposeful effort. Speaking of purpose, you might want to think about saving money for a long-term goal such as:
- Paying off your student debt
- Creating a retirement fund
- Buying a home
With these major goals in mind, you’ll feel more ambitious and confident. You’ll be equipped with a strategy, purpose, and vision to stick to your monthly saving plan.
How to Save Money in Your 20s by Budgeting
Budgeting means allocating money to different expenditure categories. It involves planning so that each dollar has a specific purpose. Budgeting allows you to limit your expenses and save money. There are different budgeting strategies out there. Our writers covered some of them in-depth, namely, the 50-30-20 method, the digital envelopes system, and the half-payment method.
With the first method, you put aside 20% of your monthly income. The rest goes into essential spending (50%) and wants (30%). The second method involves separate budget categories (or envelopes) for your major expenses. You can create these in budgeting apps. Then, allocate a strict budget to each envelope. The last method is helpful for paying recurrent bills. It suggests you save 50% of each paycheck for these expenses.
Frequently Asked Questions (FAQs)
How can you save money in your 20s when shopping?
You can try to save money by paying more often with cash. Only take a fixed amount with you each time you go shopping. You can also try to spend in moderation by limiting impulsive buying behavior. To spend less, you might want to buy generic rather than big-name brands.
Can I save money in my 20s on subscriptions?
You can try to do this by limiting your active subscriptions. Only pay for those you regularly use. Also, avoid paying for similar services. For example, you might not need HBO, and Amazon Prime Video accounts if you already have a Netflix subscription.
Should I try a money savings challenge?
This strategy can help you save money. For example, try to limit your spending to essential expenses for 30 days. Don’t buy products unless you really need them. If this is too much, start with a one-week or two-week challenge.
How can you save money on food in your 20s?
To do this, you might want to cook more often and avoid restaurants or takeout food. If you eat out, take advantage of happy hour discounts. When buying food products, also look for:
- Discounts.
- Coupons.
- Generic brands that cost less (e.g., Costco’s food brand).
Sources:
What is the 10% savings rule? – wikibox. Wiki Box | Wiki Article – Blog – The know how database blog – Wiki box. (2021, October 18). Retrieved June 22, 2022, from https://wikibox.org/en/what-is-the-10-savings-rule/
SoFi. (2022, March 10). Using the 30-day rule to control spending. SoFi. Retrieved June 22, 2022, from https://www.sofi.com/learn/content/30-day-spending-rule/
Rodrigues, R. I., Lopes, P., & Varela, M. (1AD, January 1). Factors affecting impulse buying behavior of consumers. Frontiers. Retrieved June 22, 2022, from https://www.frontiersin.org/articles/10.3389/fpsyg.2021.697080/full#:~:text=The%20impulse%20buying%20causes%20an%20emotional%20lack%20of,become%20chronic%20and%20pathological%20%28Pandya%20and%20Pandya%2C%202020%29.
My savings rule to live by – consumer financial protection bureau. (n.d). Retrieved August 9, 2022, from https://files.consumerfinance.gov/f/documents/201603_cfpb_rules-to-live-by_my-savings-rule-to-live-by.pdf