Adulting 101: A Guide to Budgeting in Your Early 20s

SouthState client learning how to budget.

Your early twenties are an exciting time filled with new opportunities and experiences. It is also an opportune time to establish good money habits, including one of the most crucial steps towards financial success: budgeting. In this guide, we will lead you through the process of creating a budget tailored to early adulthood, and provide personalized advice, tips, and tricks to help you achieve your financial goals.

Why Budgeting Matters in Your Early 20s

Creating a budget may not sound glamorous, but it's the foundation for building financial security. By committing to budgeting as a young adult, you can gain control over your spending, save for emergencies, and pay off debt. Sticking to a budget also allows you to work towards future goals such as traveling, buying a car, or even owning a home.

How to Create a Budget

Creating a budget remains a timeless, tried-and-true method for achieving financial freedom. Whether you're just starting your journey into adulthood or looking to gain better control over your finances, a well-crafted budget is your roadmap to achieving your financial goals. By taking charge of your money and making intentional choices about how you spend and save, you can pave the way for a more secure and prosperous future.

Asses Your Income and Expenses: The first step in creating a budget is understanding your income and expenses. Take stock of all your income sources: regular paychecks, part-time jobs, side hustles, and freelance work.

Next, thoroughly track your expenses for a month to identify where exactly your money is going. Divide your expenses into categories to gain better visibility into your spending patterns. Common categories include housing, transportation, groceries, entertainment, and debt repayments. By understanding your spending habits, you can identify areas where you can cut back and save more. This will help you prioritize your spending and make necessary adjustments.

Set Financial Goals: Goal setting is a crucial aspect of budgeting. Start by identifying short-term and long-term financial goals. Do you want to pay off student loans, save for a down payment, or start investing? Each goal requires a different financial strategy, and budgeting will help you allocate funds towards these objectives.

Create a Realistic Budget: Based on your income, expenses, and financial goals, it's time to create your budget. Allocate a specific amount to each expense category, ensuring that your income covers your essential needs first. You should also aim to save a portion of your income each month, ideally around 20%, if possible; however, if that’s out of reach, remember anything is better than nothing. Consider opening a savings account to separate your money and watch your savings grow.

Embracing Frugality and Smart Spending: In your early twenties, it's essential to develop healthy spending habits. Practice implementing frugal strategies, such as cooking at home, utilizing public transportation, and seeking out free or low-cost entertainment options. Cutting back on unnecessary expenses will free up funds for your savings and financial goals.

Monitoring and Adjusting Your Budget: Budgeting is an ongoing process. Regularly monitor your spending, track your progress, and adjust as needed. The Financial Tools within the SouthState mobile app can help simplify this process, allowing you to effortlessly stay on top of your finances.

The Power of Automation: Automation can be a game-changer for budgeting success. Set up automatic transfers to your savings account, automate bill payments, and enroll in Round Up to Save, a service that rounds up your purchases to the nearest dollar and transfers the difference from your checking account to your savings account. Automating your finances ensures consistency and eliminates the risk of forgetting to save or pay bills on time.

Staying Motivated: Budgeting can sometimes feel restrictive, but successfully managing your finances is a lifelong journey. Celebrate small milestones, treat yourself occasionally, visualize your progress, and find an accountability partner to keep you on track. Remember, financial freedom in your twenties sets the stage for a brighter future.

How much should I save each paycheck in my 20s?

Are you on the hunt for the best way to save money in your twenties? The Pay Yourself First method is a tried-and-true strategy for saving money, no matter what stage of life you’re in. The amount you manage to save in your twenties can be the difference in building a solid financial foundation and living paycheck-to-paycheck in the future. While the ideal savings rate can vary depending on individual circumstances, a general guideline is to aim for saving around 20% of your income if possible.

If you find it challenging to save 20% right away, start with a smaller percentage and gradually increase it over time as you become more comfortable with your budget and financial discipline. The key is to prioritize savings as an essential expense and make it a non-negotiable part of your budget.

Additionally, consider leveraging automated savings tools. Set up automatic transfers from your checking account to a designated savings account, making it easier to save consistently without the temptation to spend the money elsewhere.

Remember, the most important aspect is to establish the habit of saving early on. Even if you can only save a smaller percentage initially, the discipline and habit of saving will have a positive impact on your financial well-being in the long run.

About the Author, ¬¬Krissy Williams: Krissy Williams, Branch Manager at the SouthState Whitemarsh Island location, graduated from Georgia Southern University in 2006 with a Bachelor’s degree in Finance. She started her career in banking fresh out of college with First National Bank. Throughout her career she experienced closures and mergers, but she stayed with the same company – now SouthState – all along. Her favorite part of her job is getting to know her customers and helping them become knowledgeable about their finances.

  • This content is general in nature and provided for informational use only. Content may be used in connection with the advertising and marketing of products and services offered by SouthState Bank, N.A. and its subsidiaries and affiliates. This is not to be considered legal, tax, accounting, financial or investment advice. You should seek individualized advice from personal financial, legal, tax and/or other professionals, as appropriate depending on the specific facts of your situation. We do not make any warranties as to the completeness or accuracy of this information and have no liability for your use of this information.

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