How to Manage Money in Your 20s? - Top 7 Tips (2024)

Anita was over the moon when she secured her first job. Excited by the salary on offer, she promised herself a new wardrobe, weekends out with friends, and maybe even that dream holiday. A few months later, the excitement waned, and the initial euphoria began to fade. Anita found herself pondering the whereabouts of her hard-earned money. Realising the need to take control of her finances, Anita decided to make a change.

If you, like Anita, are in your twenties 20s, then you are at an age when life feels vibrant and thrilling, filled with limitless possibilities and exciting adventures. It's also a time when you gain financial independence, which means both opportunity and responsibility.Managing your money wisely in your 20s sets you up for a smooth financial journey in the decades to come.

Here are a few tips to help you get started -

1. Create a budget and stick to it

The foundation of good money management is a smart budget. Start by tracking your income and expenses to understand how your money moves every month. There are multiple budgeting apps available on the Internet, or you can simply use a spreadsheet. Customise your budget to match your goals and priorities. Remember, a budget is not about restrictions; it’s a tool to enjoy life in the present while preparing for the future.

2. Save more, spend wisely

After Anita faced the hard truth of an empty wallet, she realised the power of choice. Choosing home-cooked meals over frequent dining out, opting for budget-friendly entertainment, and prioritising needs over wants helped her save ₹12,000 more each month. Automating savings works wonders — directly transfer a slice of your salary to a Savings Account before you start spending! Remember, small savings add up quickly.

Set up automatic transfers from your Savings Account to a high-interest Fixed Deposit Account like the Axis Bank Fixed Deposit Plus Account. With a minimum investment of ₹5,000 and flexible tenures suited to your needs – it offers attractive and guaranteed returns and makes saving effortless.

3. Build a good credit score

Your credit score is your financial reputation. Paying bills and loan EMIs on time can help you manage credit responsibly. Having a good credit score makes it easier to secure loans, mortgages and better Credit Card deals in the future.

4. Set up an emergency fund

Life can be unpredictable — sudden repairs, unexpected expenses, job loss or medical emergencies can arise at any time. Aim to save 6 to 9 months' worth of living expenses in a separate Savings Account. This can be your emergency fund, providing you a safety net when the unexpected happens.

5. Start saving for retirement

It may seem too far away but starting to save for retirement in your 20s gives your money the maximum time to grow through the magic of compounding. Consider setting up regular contributions to an equity Mutual Fund or Public Provident Fund (PPF) to save a sizeable corpus for a comfortable retirement. The former will give inflation-beating returns over the long term, while the latter offers stable and secure returns and a mandatory long-term saving option due to the 15-year lock-in period.

6. Feel the freedom by paying off debts

Student Loans or Credit Card debt can derail your financial train. Prioritise paying these off as quickly as possible. The longer you take for paying these bills off, the more interest will be charged, which can quickly erode your savings and create a financial spiral.

7. Develop good money habits

• Educate yourself:There are multiple resources available on personal finance. Read books / blogs and explore online courses.
• Set financial goals:What do you want your money to do for you in the future? Having clear goals makes you more likely to save for them.
• Talk about money openly:Discuss finances with trusted friends and family. It helps break taboos and can offer valuable support.

Anita took charge of her finances – she created a budget, cut unnecessary expenses and automated her savings. Within a year, she has saved a decent emergency fund and has started saving up for a deposit on her first apartment. She still goes out with friends but feels more in control – a much better feeling than that sinking dread when she checked her empty bank account a year ago.

Also Read: Top 9 benefits of having a Savings Account

This is how Anita structured her monthly finances:

• Monthly take home pay-Rs 65000
• Monthly expenses-Rs 45,000
• Monthly savings – Rs 20000

This is how she allocated her savings of Rs 20000 -

• Emergency fund (a second Savings Account) - Rs 5000
• Long-term Investments (monthly SIPs in equity Mutual funds) – Rs 8000
• Retirement Savings (monthly contribution to her Public Provident Fund account) – Rs 5000
• Short-term goals (monthly contribution in Recurring Deposit) - Rs 2000

Remember, just like Anita, you have the power to shape your financial future. Start building a strong financial foundation today!

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.