Money Trouble in Your 20s? Back to the Basics (2024)

FAQs

Is it normal to struggle financially in your 20s? ›

Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn't paying you enough, you're struggling to make rent, have no savings, and are being crushed by debt.

Millennials and Gen Z represent a wide range of ages and credit profiles, but both include consumers in their 20s. Having more than $10,000 of debt might sound like a lot for someone at the beginning stages of their career, but it's not all bad as long as you're strategic with your pay-off plan.

It may be that you have too much credit card debt, not enough income, or you overspend on unnecessary purchases when you feel stressed or anxious. Or perhaps, it's a combination of problems. Make a separate plan for each one.

The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

Nearly three-quarters (73.2%) of millennials report living paycheck to paycheck. That's the highest of any generational cohort. Even more millennials than Gen Xers struggle with budgeting and financial planning (57.08%). They further report challenges with high monthly bills (50.27%) and low income (41.96%).

What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.

Gen X (ages 43 to 58) not only carries the most debt on average of all the generations, but is also the debt leader in credit card and total non-mortgage debt.

U.S. consumers carry $6,501 in credit card debt on average, according to Experian data, but if your balance is much higher—say, $20,000 or beyond—you may feel hopeless. Paying off a high credit card balance can be a daunting task, but it is possible.

Why am I always broke financially? ›

In many cases, becoming broke is caused by two factors. Firstly, you may not be earning enough money. Often, this occurs suddenly after losing a job, getting sick, or being injured. Or, in some cases, you're underpaid or unable to work as much as you would like.

Money dysmorphia is a negative but unrealistic assessment of your personal finance position. Symptoms of money dysmorphia include obsessive earning, money hoarding and negative shopping habits. Younger people are most at risk of money dysmorphia, but traumatic events can also trigger it.

“Ideally, your savings should reach $20,000 by the time you turn 25,” says Bill Ryze, a certified Chartered Financial Consultant (ChFC) and board advisor at Fiona. The national average for Americans between 25 and 30 years of age is $20,540.

B-U-D-G-E-T

If given the chance, I'd tell my 20-year-old self to create a realistic, attainable budget; to spend less than I made; and to be honest with myself about what my spending habits really looked like instead of putting my head in the sand, going to brunch, and swiping my debit card.

They might, in fact, be the years when you feel your worst. Research shows that, across our life span, mental health follows a J-shaped curve: it declines from childhood to young adulthood and then it rises steadily in the decades after that.

In your twenties, you will face a range of challenges, from choosing a career path to navigating relationships and managing finances. It's a time when you will learn a lot about yourself and the world around you. While it can be a time of uncertainty, it's also a time of opportunity.

While it would be ideal for young adults to set aside 20% of take-home pay for savings, between student loan debt and a limited income, this goal might not be realistic. If you're working with a tight budget, aim to save as much as you can, even if you can't stick to your 20% goal.