The Best 4 Years of Your Life... Are Over: 5 Financial Steps for 20-Somethings

In an impromptu Facebook and Twitter survey, I asked 20-somethings to fill in the blank: "When I think about my finances, I feel... " The top three answers were 1) Guilty, 2) Anxious and 3) Scared.

To further highlight the negativity among 20-somethings when it comes to finances, survey write-in responses included "Depressed," "Like I'm going to make a mess in my pants," and the ever-eloquent "Being growed up sucks."

This social media litmus test dovetails well with PNC Bank's study of 20-somethings' financial mindset. The study revealed that only 23% of 20-somethings consider themselves financially independent and nearly half said they aren't where they want to be or thought they would be financially.

Guilty, anxious and scared. Sounds about right.

If these emotions bubble up when you think about your finances, it's time to stop complaining about how broke you are, how confusing finances are, or putting off financial responsibilities for a rainy day. For those of you who have taken a back seat in your financial management, cutting back on happy hour isn't a sufficient budgeting strategy and your credit card debt from college isn't going away anytime soon.

Now is the time to finally stop making excuses and start being "growed up" with your finances with these five steps.

  1. Your budget: Stop feeling sorry for yourself. Friends say it everyday: "I'm so broke." The next weekend, I join the same friends in spending $100 on dinner and drinks. Instead of ignoring the limitations of your financial situation, create a budget so simple you'll actually do it. It's all about figuring out where your money is going and where you want it to go. It's poor advice to tell you to ditch your beloved $4 lattes, brown-bag lunch everyday, and skip that snowboarding trip with friends. You should be able to choose what valuable things you spend your money on. But the financial freedom to choose where your money goes starts with figuring out how you're spending your money now, and adjusting to put your money where it matters most. One quick tip to get the ball rolling on budgeting: have "no spend days" every month, when you pledge not to spend a cent all day (a necessary action after big weekends out).

Awesome tool: With several popular money management services available, including Mint, Adaptu, and HelloWallet, there's an important step most people miss. It's not enough to just set up a budget; if it's not part of your day-to-day habits, you'll never keep up with it. A great way to do that is by using a smartphone app from one of the aforementioned services, and instead of playing Angry Birds on your downtime, make it a point to check on your spending once a day anywhere you go.

  • Your credit: Trick yourself to better credit. If you want to get approved and save money on your future car, home and credit cards, you need good credit. Here's an effective strategy to build great credit quickly: treat your credit card like a debit card. Put necessary expenses on your credit card, such as gas and groceries, and pay it off in full and on time by the end of the month. This credit-building strategy works because you use credit regularly, pay on time consistently, and by effectively replacing your debit card, you should have the funds to pay your credit card in full. If you can't pay off your bill, it's a red flag that your spending is outpacing your monthly income. Follow these rules and don't carry a balance month-to-month, and you can master the steps to excellent credit.
    Awesome tool: Track your progress by checking your credit score for free at, and update your score every few weeks to monitor your ups and downs. also offers free credit monitoring that automatically notifies you by email if any significant change to your credit report is detected.
  • Your debts: Pay them off before saving. Contributing to your savings account is usually tip number one on most financial checklists. However, if you don't have much wiggle room after necessary expenses, focus on paying your credit card debts before savings. Why? You lose more money in credit card interest charges (about 15-20% annually) than you can earn in savings account interest (less than 1% earned annually). Let's say you deposit $100 monthly into your savings account earning 1% APY; in a year, you'll earn $6.50 in interest. If you also had a $2,000 credit card debt accruing 15% APR, and only paid the minimum monthly payment, you'll pay about $280 in interest in the same year. Earn $6.50 or lose $280? Plug the hole first and pay off those debts, then allocate your money towards savings.
    Awesome tool: Stop doing the guesswork on how to pay off your debts. Check out free online tools like ReadyForZero and SavvyMoney that create a personalized, feasible plan for you to ditch your debts as quickly as possible.
  • Your savings: Save till it hurts. Once you have credit card debt under control, it's time to treat your savings like a rotisserie chicken: set it and forget it. The two common savings strategies are either to pay off your necessary expenses each month and save whatever is left over, or save a portion of your paycheck first and plan the your monthly spending with what's leftover. The second strategy leads to a steady growth in your wealth. Enforce this strategy by setting up automatic deposits straight to your savings as soon as your paycheck comes in. How much should you save? One rule of thumb is to save about 10% of your income each month. If that seems a little tight, great-- you want to save till it hurts. If your budget buckles a bit and you have to give up a few luxuries, you're probably saving a good amount. Remember that savings shouldn't be an afterthought, but a monthly priority.
    Awesome tool: Opt for an online savings account that offers higher interest rates than traditional banks. Popular picks include Ally Bank, American Express Bank and Discover Bank, all of which offer interest rates about 5x higher than the national average. Be sure to read details on what you need to open an account, and start moving your money.
  • Your investments: It's not so scary, so get started. As your income grows, there are two places to put additional cash: increase your monthly savings contributions and start to invest. While your savings account provides security, it's beneficial to also grow your money with an investment account that allows you to play with risk for the potential of higher returns. As a young investor, you can take a chance on some risk and start earlier to let your money get accustomed to riding the ups and downs of the market. Contrary to common assumptions, you don't need to be sitting on a lump sum of $10,000 to start investing. You can start with as little as $100 and set up monthly deposits to go towards your investments. And if you need one more reason to start investing now, consider that over the long haul and accounting for inflation, stocks are actually the safest, easiest way to build wealth. Awesome tool: If you're interested in managing your own brokerage account, check out beginner investor-friendly online discount brokerage firms such as Tradeking and Scotttrade that have lower fees and provide educational resources. If you want the easiest and simplest route to investing, check out, a new kind of online brokerage that gives you simple options of where to put your money, and from there, Betterment does the legwork of researching and taking care of your investments.
  • "Getting started is more important than being the smartest person in the room," wrote Ramit Sethi, creator of the popular personal finance blog I Will Teach You To Be Rich. These steps are just a mouse-click away, so get serious about your finances and get started.

    Justine Rivero is the Credit Advisor for, a free credit management website that helps over 4 million consumers access their truly free credit score and free credit monitoring.